With Thanksgiving just around
the corner, many of us will soon have large get-togethers with family and
friends to celebrate. These gatherings have the Student Loan Ranger
picturing the "extended family" of a student loan. You'd need a big table
to seat them all.
It's always awkward to make
small talk with your great aunt or second cousin if you don't actually know who
they are. To avoid a similar fate when you run into a member of your loan's
family, let's make sure you're familiar with what each one does.
• William D. Ford Federal
Direct Loan Program: As of July 1, 2010, all federal student
loans are originated through the direct loan program. These loans include Stafford loans and PLUS loans, and the U.S. Department
of Education serves as their sole lender.
• Federal Family Education Loan
Program: Before
July 1, 2010, students could borrow federal student loans through the
federal direct loan program or through FFELP. The biggest
difference between the two is that FFELP allowed students to borrow from a
private lender, not the federal government.
Many federal student loan
benefits, including some income-driven repayment plans, are restricted to
direct loan borrowers only. However, FFELP borrowers have the option to
consolidate their loans into direct loans to become eligible for these options.
They can also access the "original" income-based repayment without
consolidating.
• Your school: Your school always starts the financial aid
process. Their financial aid office will determine your eligibility for aid, as
well as award your federal student loans. This information will be included in
your award letter.
Once you decide which loans to
accept, and remember to think
about the future when doing this,
the school will originate your loans and schedule their disbursements. That
means they determine how much of each loan you receive at a time and when.
• Your lender: This is who provides your loan funds.
Within the direct loan program, your lender will always be the Department
of Education. They'll send the money to the school, which credits it to your
account.
Your school can also act as
your lender, both for institutional aid and federal Perkins loans. Funding for
new Perkins borrowers, however, has ceased.
For private student loans, a
nonfederal financial institution such as a private
bank or credit union acts as your lender. They will disburse
your loan and set the terms and conditions for it. Your school will not
facilitate this process, but they will certify that the loan amount won't be
higher than your cost of attendance.
• Your servicer: While lenders provide the money, they often
outsource the day-to-day management of your loan to a servicer. These
organizations provide services like sending bills, collecting payments and
providing customer service.
If you have questions about
your bill or repayment options, contact your servicer. Servicers can also change frequently, so make sure yours has
up-to-date contact information for you.
• Collection agency: If your student
loans default, your lender, servicer, or the Department of Education may
hire a collection agency. These companies specialize in the collection of
delinquent or defaulted loans.
• Guarantor: A guarantor is a nonprofit or
state organization that works with your lender, servicer, school, and the
Department of Education to help you successfully repay FFELP loans. If
your FFELP student loans default, your guarantor takes ownership of them.
Guarantors are not part of the direct loan program.
• Ombudsman: The Federal Student Aid Ombudsman Group
helps borrowers resolve disputes about their federal student loans. If you
can't resolve a dispute with your loan holder in any other fashion.
• Consumer Financial Protection Bureau: The CFPB serves as a financial services
industry watchdog. For study loan, they
track complaints made against lenders and servicers. They do this to provide
information that can help borrowers choose service providers with good
reputations. They also spot trends and suggest solutions to improve service to
borrowers
• National Student Loan Data
System: Like we
said, you need a pretty big table to accommodate your loan's family.
Fortunately, this federal database offers some figurative place cards and
simplifies things for you.
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