Do you know if your student loans are private or federal? It’s an unfortunate fact that many college graduates don’t completely understand their student loans. You might not know who your student loan servicer is, or why the difference between private and federal student loans matters.
Let’s review a few methods you can use to determine if your student loans are private or federal, what makes each different, and why knowing what type of loan you have is important.
What Makes Federal and Private Student Loans Different?
In case you’re not sure why you should know whether your student loans are federal or private, let’s briefly go over the differences between the two.
Federal student loans are offered through programs funded by the federal government to those that demonstrate a need for financial aid. Typically, these loans are easy to qualify for – in most cases, your credit isn’t even checked.
There are two different federal student loan programs available:
The William D. Ford Federal Direct Loan Program: The lender under this program is the U.S. Department of Education. This program consists of 4 loan types – Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation. If you’re an undergraduate, you’ll only have Direct Subsidized or Unsubsidized loans.
The Federal Perkins Loan Program: The lender under this program is actually your school, and this is for students with an exceptional need for aid.
Individual banks or credit unions, such as Chase, Wells Fargo, Sallie Mae, Discover, Citizens Bank, etc, make private student loans. There are many lenders that offer private student loans, but the terms aren’t as favorable as those for federal loans. Private loans also require a credit check and may be harder to qualify for.
Additionally, federal student loans come with guaranteed benefits, such as being able to enter a period of forbearance or deferment with your loans (temporarily stops payments), income-based repayment plans, and loan forgiveness. Private loans don’t guarantee these benefits, and different lenders offer different benefits.
How To Determine if Your Loans Are Federal
The first thing you should do to see if you have federal loans is log onto the National Student Loan Data System. The only loans listed here are federal.
If you’ve never used the NSLDS before, you’ll want to click the “Financial Review” button on the homepage, hit “Accept,” and then enter your credentials.
If you have an FSA ID, you can enter it here. If not, there’s an option to create one. In May of 2015, the government redesigned its student loan system. You can use your FSA ID to log into multiple government sites now. However, if you haven’t logged on in quite a while, you might need to create one.
In the event you forgot your credentials, you can click on the “Forgot my username/password” button and have the information emailed to you, or answer a challenge question. You’ll just be required to enter your Social Security Number, last name, and date of birth.
I had to go through this process myself and create a new ID as it had been a few years since I had last applied for FAFSA. The process is very simple. After entering your information to create an ID, you just need to link your PIN to your FSA account (you should have a PIN if you applied for FAFSA). If you’ve forgotten it, you can answer a challenge question to have it imported. You also need to confirm your email by entering in a secured code that’s sent to you.
Once you log on, you’ll see a list of all the student loans that were disbursed to you.
This page will also show you what your original loan amount was, and how much you currently owe.
Click on the numbered box to the left of your loan to determine your loan servicer. This will display all the information about that particular loan. Your loan servicer will be listed under the “Servicer/Lender/Guaranty Agency/ED Servicer Information” section. The name, address, phone number, and website should be displayed.
Additionally, this page will also inform you of your loan terms. Along with your original loan balance and current outstanding balance, it will tell you what type of interest rate you have (fixed or variable), your interest rate, and the current status of the loan.
How To Determine If Your Student Loan is Private
Private student loans are loans not made by the government – banking institutions such as Sallie Mae, Wells Fargo, Chase, Citizens Bank, etc make them.
As a result, there are more lenders to look out for when it comes to private loans. Unfortunately, there’s no central reporting system for private loans like there is for federal loans, which makes them tricky to track down.
Your first stop should be the NSLD to at least see if you have any federal loans. In 2012, only 20% of graduates had private loans, so chances are good at least some of your loans are federal.
Another way to check is to take a look at your credit report. You don’t have to pay for one if you haven’t ordered your three free reports from www.annualcreditreport.com. You can get your credit score within minutes of filling out your information on there.
Some lenders may not look familiar to you. Just conduct a Google search and see what comes up. Further investigation via phone may be necessary to obtain your loan information if you don’t remember making a login for your lenders website.
If you see “Federal Direct Loan,” “Federal Perkins,” “Direct Loan Consolidation,” or “Stafford” on your report, ensure it matches up with what’s on your NSLD account. These are federal loans.
You might also be able to call your school’s financial aid office to see if they have any records of your loans. Otherwise, hopefully you have your own records of the loans you took out.
What Should You Do Once You Find Out?
Knowing whether your student loans are private or federal will help if you ever decide to refinance or consolidate your student loans. The process is slightly different if you want to consolidate your federal loans under a Direct Consolidation Loan (through the federal government), or if you want to refinance through a private lender.
Additionally, if you have federal student loans and you’re experiencing difficulty in making payments, you might be eligible for one of the income-based repayment plans offered. Not knowing what type of loan you have means not knowing the repayment assistance options available to you. You can learn more about the three types of income-based repayment plans here.