You may be surprised to learn that there are a few different types of student loan ownership.
We’ll break down who owns your student loan, and how it might affect your repayment options.
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Private student loans are made by banks, credit unions, state agencies, and schools. Your loan might be owned by one of these lenders or it could be sold to a student loan servicer. If your loan is sold, the new servicer will send you notice that they now own your loan. You might have more than one servicer if you have multiple loans.
The Different Types of Student Loans
There are two different types of student loans: federal student loans and private student loans. Your loan servicer will manage your federal student loan for you, and you’ll make your payments to your loan servicer. If you have a private student loan, the lender that issued your loan will be your loan servicer, and you’ll make your payments to them.
Federal Student Loans
The federal government is the largest provider of student loans, offering four main types of loans.
-Direct Subsidized Loans are for students with financial need, as determined by the FAFSA. The government pays the interest on these loans while the borrower is in school at least half-time, during the six-month grace period after graduation, and during periods of deferment or forbearance.
-Direct Unsubsidized Loans are not based on financial need. The borrower is responsible for all interest that accrues on an unsubsidized loan.
-Direct PLUS Loans are available to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. The borrower is responsible for all interest that accrues on a PLUS loan.
-Direct Consolidation Loans allow borrowers to combine all of their eligible federal student loans into a single loan with a fixed interest rate based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent.
Private Student Loans
Like federal student loans, private student loans are used to pay for college expenses and can be used for tuition, room and board, books, and other educational costs. But unlike federal student loans, private student loans are not guaranteed by the federal government, they have variable interest rates that can change over time, and they often come with origination fees. That means if you have a private student loan and you can’t make your payments, the lender can take you to court and garnish your wages.
There are two types of private student loans:
-Secured: A secured loan is one that is backed by collateral. That collateral could be something like a car or a house. If you default on a secured loan, the lender can repossess the collateral.
-Unsecured: An unsecured loan is not backed by collateral. That means if you default on the loan, the lender can’t take anything from you. They can still sue you and garnish your wages, but they can’t take your car or your house.
Who Owns My Student Loan?
If you’re like most people, you probably don’t know who owns your student loan. Your loan could be owned by the federal government, a bank, or a private lender. If you’re not sure who owns your loan, you can find out by logging into your account on the National Student Loan Data System. Once you login, click on “Loan Servicer” to find out who currently services your loan.
Federal Student Loans
Federal student loans are made by the government through the Department of Education. If you have a federal student loan, your loan is owned by the government. You can use the National Student Loan Data System (NSLDS) to find out who owns your federal student loan.
Private Student Loans
If you have a private student loan, your loan is not owned by the federal government. Private student loans are made by banks, credit unions, and other private lenders.
The terms of your loan, including the interest rate and fees, are set by the lender when you borrow the money. Your lender may be willing to work with you if you have trouble making payments.
If you’re not sure who your lender is, look for contact information on your monthly statement or login to your account on the lender’s website. You can also check your credit report to see who your lenders are.
Assuming you have a federal student loan, you can log in to “My Federal Student Aid” to find out who your servicer is. If you have a private student loan, you’ll need to contact your lender directly to find out who services your loan.