For Direct Loans, the lender is the U.S. Department of Education. If you have a FFEL Program loan, the lender may be a financial institution such as a bank or credit union. If you have a Perkins Loan, the lender is the school where you received the loan.
All federal student aid programs – which include student loans, Pell Grants and work-study, for example – are funded by federal tax dollars paid by U.S. citizens. Each year, Congress appropriates money to fund these programs as part of the annual budget process.
Student loans are owned by the federal government or private institutions, depending on the type of student loan. Federal student loans are owned by the U.S. Department of Education while private student loans are owned by the financial institution that granted them.
You repay your Direct Loan(s) to the U.S. Department of Education via a Servicer they assign to you. Before you take out a loan, it's important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
Federal student loans are funded by issuing U.S. Treasuries, which is money borrowed from investors. The federal government must pay interest on the U.S. Treasuries. So, part of the interest that borrowers pay covers the cost of the funds that are used to make the loans.
When the time comes to start making payments, only the student is obligated to repay these loans — not the parents.
Whoever gave you the money for your education (the lender) is usually who owns your student loan. This is either the federal government or a private company. But your loan servicer is who handles the loan repayment—and who dishes out the consequences if you don't pay up.
The federal government began guaranteeing student loans provided by banks and non-profit lenders in 1965, creating the program that is now called the Federal Family Education Loan (FFEL) program.
Compare the loans listed on your studentaid.gov account with your credit report. Any loans that are listed on your studentaid.gov account are federal student loans. If any loans on your credit reports are not listed on your studentaid.gov account, they are probably private student loans.
Total debt by age group in the U.S.
Analysis of the debt share in the U.S. shows that people aged 40-49 hold the largest amount of debt at $4.21 trillion in total.
Total federal student loan debt
Most student loans — about 92.4% — are owned by the government. Total federal student loan borrowers: 42.7 million. Total outstanding federal student loan debt: $1.64 trillion.
The NDEA evolved into the Perkins Loan Program, which later facilitated the establishment of more comprehensive federal student loan programs under Title IV of the Higher Education Act of 1965, an Act signed into law by President Lyndon Johnson.
Federal Student Aid, part of the U.S. Department of Education, is the largest provider of student financial aid in the nation. At the office of Federal Student Aid, more than 1,400 employees assist more than 10 million students each year.
A portion of a federal student loan that the school pays out by applying the funds to the student's school account or by paying the borrower directly.
The office of Federal Student Aid is responsible for directly managing or overseeing an outstanding federal student loan portfolio comprised of billions of dollars in Title IV loans and representing millions of borrowers.
Congress created the Public Service Loan Forgiveness (PSLF) program in 2007 as part of the College Cost Reduction and Access Act (the “Act”). The final bill passed with wide bipartisan majorities before being signed into law by President George W.
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.
Universities Are Investing in More Student Services
As schools invest more to attract students, costs for students go up. Between the 2009-2010 and 2020-2021 academic years, student services expenditures increased by 58% at private institutions and 43% at public institutions, per NCES.
About 75% of student loan borrowers took loans to go to two- or four-year colleges; they account for about half of all student loan debt outstanding. The remaining 25% of borrowers went to graduate school; they account for the other half of the debt outstanding.
Sallie Mae is not a federal loan servicer.
But in 2014, it split into two separate companies. The Sallie Mae of today, however, is an education solutions company and consumer banking business. The other company became Navient. Importantly, the two companies are independent and not associated with one another.
Federal student loan servicers handle your federal student loans on behalf of the U.S. Department of Education. The biggest loan servicers are MOHELA, Aidvantage and Nelnet. Your loan servicer might have changed during the payment pause. Find out who your loan servicer is by logging in to your student loan account.
What happens to my loans if I die? If you die, then your federal student loans will be discharged after the required proof of death is submitted.
In community property states like Arizona, California and Texas, marital debt is treated as jointly owned, with the starting point being an equal division upon divorce. This includes student loans taken out during the marriage, regardless of which spouse pursued the education.
Impact on Co-signers and Guarantors
If the borrower passes away, the responsibility for repaying the loan immediately transfers to the co-signer or guarantor. This shift in obligation occurs as soon as they contact the bank or financial institution to continue the repayment process.