The 529 plan is not a federal student loan; it is a tax-advantaged savings plan for education expenses. In contrast, Stafford, Direct PLUS, and Perkins loans are types of federal student loans available to assist with education costs. Therefore, the correct answer is C. 529 plan.
If you think you have a federal loan, log into the Federal Student Aid website with your FSA ID to confirm. If you're paying a lender not listed there, your loan might be private.
Of the $1.7 trillion outstanding student loan debt in 2023, $1.6 trillion – or about 93% – was made and held by the federal government. The remaining – roughly 7% of student loan debt – was held by numerous private lenders, including Sallie Mae.
Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations. Federal student loans usually have more benefits than private loans.
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.
Private student loans are usually only forgiven when the borrower becomes permanently disabled or dies—sometimes not even then. While there are several options for federal student loan cancellation and forgiveness, private programs for cancellation are less common.
Lender Sallie Mae used to offer federal student loans, and if you received one, you may be able to qualify for loan forgiveness. But federal student loan forgiveness can be hard to get — and if you have a private student loan through Sallie Mae, federal forgiveness is not available.
Since 2021, MOHELA has more than tripled its portfolio of Department of Education (ED)-held federal loans. At the same time, MOHELA continues to serve as the exclusive loan servicer for private student loans made by banks like SoFi and KeyBank (d/b/a Laurel Road).
What is Navient? Navient is a company that services federal and private student loans.
One of the primary reasons to prioritize federal student loans is because they tend to have lower interest rates. Right now, the average student loan rates range from 6.53% to 9.08% for federal loans, while their private counterparts range from 3.74% to 17.99%.
If you take out a federal student loan, the U.S. Department of Education will assign you to one of the student loan servicers that oversee federal student loans after your loan amount is first disbursed. Edfinancial is one of the seven student loan services for federal student loans.
Nelnet is a federal student loan servicer working on behalf of the U.S. Department of Education (ED), the government agency that lends you student loans.
The most common types of federal student loans are Direct Loans, Parent PLUS Loans, Graduate PLUS Loans, Stafford Loans, Consolidation Loans, Perkins Loans, and Federal Family Education Loans (FFEL).
Pay Off High-Interest Loans First
With this approach, you pay off your loans from the highest interest rate to the lowest. You make the minimum payments on each balance except the highest-rate loan. You also make an extra monthly payment based on how much you can put toward the debt.
Many financial “experts” say you should always pay with cash when possible. They apply this rule to all debts, including credit cards, auto loans, home loans, and yes, student loans.
If you work in certain public service jobs and have made 120 payments on your Direct Loans, you may be eligible to have your loans forgiven. If some or all of your payments were not made on a qualifying repayment plan for PSLF, you may be able to receive loan forgiveness under a temporary opportunity.
MOHELA is Here to Help Student Loan Borrowers Manage Repayment. As the federal contractor that services your federally owned loans on behalf of the U.S. Department of Education (ED), Office of Federal Student Aid (FSA), MOHELA is here to help you manage the repayment of your federal loans.
What happened? Student loans disappear from credit reports 7.5 years from the date they are paid in full, charged-off, or entered default. However, education debt can reappear if you dig out of default with consolidation or loan rehabilitation.
What student loans are not eligible for forgiveness? Private student loans, by definition, are private and are not eligible to be forgiven. These are loans the borrower owes to student loan providers and not the federal government.
After a referral from the CFPB, in 2014, the Department of Justice and the Federal Deposit Insurance Corporation ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 servicemembers.
Thus, if you ever had a Sallie Mae loan or had Sallie Mae conduct loan servicing, that loan and servicing, likely, was transferred to Navient. Further, Navient then changed its name in 2021 to Aidvantage.
To get rid of them, you'll need to pay off the balance in full or qualify for a loan forgiveness option like Public Service Loan Forgiveness or Total and Permanent Disability Discharge. Read more about how to get a copy of a student loan promissory note. Learn More: Do Student Loans Go Away After 20 Years?
No, there is no way to change private student loans to federal loans. However, you can refinance your private and federal loans together, ideally to qualify for a lower rate or better loan terms.
Those who borrowed from Sallie Mae after this 2014 split have private student loans, which aren't eligible for federal forgiveness programs. However, Sallie Mae will discharge debts for borrowers who die or become totally and permanently disabled.