Federal vs.
While both federal and private student loans are generally unsecured, there are some key differences: Federal student loans: Always unsecured. Offer more protections and flexible repayment options.
A Federal Direct Loan is a student loan made directly by the U.S. Department of Education. There are four types of Direct Loans: Direct Subsidized Loans are given to undergraduate students who demonstrate financial need.
This means they cannot be automatically discharged in a Chapter 7 or Chapter 13 bankruptcy proceeding. In order to discharge your student loans, you'll need to work with a zero-down bankruptcy attorney to file a separate lawsuit which is called an adversary proceeding.
Secured debts are those for which the borrower puts up some asset to serve as collateral for the loan. The secured loans lower the amount of risk for lenders. Unsecured debt has no collateral backing. Lenders issue funds in an unsecured loan based solely on the borrower's creditworthiness and promise to repay.
What is an unsecured loan? An unsecured loan requires no collateral, though you are still charged interest and sometimes fees. Student loans, personal loans and credit cards are all example of unsecured loans.
The term “unsecured debt” refers to financing that is not backed by collateral, which is an asset that you own, such as your home or a vehicle. Personal loans, credit cards and student loans are all examples of common types of debt that are unsecured.
You may have your federal student loan discharged in bankruptcy only if you file a separate action, known as an "adversary proceeding," requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents.
Your loan can be discharged only under specific circumstances, such as school closure, a school's false certification of your eligibility to receive a loan, a school's failure to pay a required loan refund, or because of total and permanent disability, bankruptcy, identity theft, or death.
The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units ...
Federal student loans are issued by the federal government and offer benefits such as fixed interest rates and income-driven and flexible payment plans. There are four types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.
On your account dashboard, you can find “My Loan Servicers” or check the National Student Loan Program System. If you're making payments to a lender that isn't listed, there's a chance your loan isn't federal.
Unsecured loans, such as personal loans and student loans, have no collateral behind them. If you default on an unsecured loan, the lender cannot collect anything in response. For example, both private and federal student loans are unsecured debt, so the lender can't take away your diploma if you miss payments.
What are the differences between federal and private student loans? Federal student loans are made by the government, with terms and conditions that are set by law, and include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private loans.
The federal funds market consists of domestic unsecured borrowings in U.S. dollars by depository institutions from other depository institutions and certain other entities, primarily government-sponsored enterprises.
Loans may appear on your credit reports even while deferred.
Typically, student loan payments begin once you graduate. Until then, you're considered to be “in deferment.” But student loans may still appear on credit reports while you're in school and before you've started making payments.
After at least 20 years of student loan payments under an income-driven repayment plan — IDR forgiveness and 20-year student loan forgiveness. After 25 years if you borrowed loans for graduate school — 25-year federal loan forgiveness.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
You may be eligible for income-driven repayment (IDR) loan forgiveness if you've have been in repayment for 20 or 25 years. An IDR plan bases your monthly payment on your income and family size.
Sallie Mae is not a federal loan servicer.
When Sallie Mae first formed, it was a government-sponsored enterprise servicing federal student loans — or loans made by the government. But in 2014, it split into two separate companies.
Your loan holder can order your employer to withhold up to 15% of your disposable pay to collect your defaulted debt without taking you to court. This withholding (“garnishment”) continues until your defaulted loan is paid in full or removed from default.
You cannot be arrested or sentenced to prison for not paying off debt such as student loans, credit cards, personal loans, car loans, home loans or medical bills. A debt collector can, however, file a lawsuit against you in state civil court to collect money that you owe.
Under California law, debt collectors have the right to place a lien on a person's home once they get a judgment. California law then lets the debt collector force the sale of a person's home to collect the judgment, even if that property is the debtor's only home.
Debts you're not responsible for
You might not have to pay a debt if: it's been six years or more since you made a payment or were in contact with the creditor.