Most student loans — about 92.4% — are owned by the government.
Generally, there are two types of student loans—federal and private. Federal student loans and federal parent loans: These loans are funded by the federal government. Private student loans: These loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.
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.
The loan holder of a Direct Loan is the U.S. Department of Education. A loan servicer is a company we assign to handle the billing and other services on your federal student loan on our behalf, at no cost to you.
The office of Federal Student Aid (FSA) provides approximately $120.8 billion in grant, work-study, and loan funds each year to help students and their families pay for college or career school.
In most cases, your child's school will give you your loan money by crediting it to your child's school account to pay tuition, fees, room, board, and other authorized charges. If there is money left over, the school will pay it to you.
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.
College Tuition Funding Sources
The average family uses a few – or all – of the following to pay for college: Scholarships and Grants – Free money that does not have to be paid back. Financial Aid – Distributed by the government and/or colleges and comes in the form of grants, work study, or student loans.
Students are generally borrowing more because college tuition has grown many times faster than income. The cost of college—and resulting debt—is higher in the United States than in almost all other wealthy countries, where higher education is often free or heavily subsidized.
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.
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.
In the case of student loans, the student is responsible for repaying the debt — whether they graduated or not. The only exception to this rule are parent PLUS loans, in which the parent — not the student — is responsible for that debt.
Billionaire Robert F. Smith pledged to pay off student loans for every member of Morehouse College's graduating class. The Ivy League-educated business leader made his fortune investing in software firms and other tech companies.
Who has the most student loan debt by race? Black adults are more likely to have student loan debt than those in other racial or ethnic groups. They are more likely than white adults to hold student debt at every level of educational attainment.
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.
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.
Rising Operating Costs
And it helps little that universities tend to hire highly educated people, who command high salaries. In fact, most institutions of higher education spend much of their funding on compensation and, as tuition fees increase, so do their payouts (AAUP, 2018).
Out of the multiple countries we examined, the United Kingdom and the United States hold the record for the highest average student loan debt. In England, students graduate with an average student loan debt of over $54,000, while in the U.S. students have an average of $28,400 at graduation.
2. Student loan debt has been growing faster than other sources of household debt. From 2004 to 2023, student loan debt rose over 500 percent — growing faster than other household debt. Student debt is also the third-largest source of household debt, trailing only mortgage debt and auto loan debt.
If your monthly payment does not cover the accrued interest, your loan balance will go up, even though you're making payments. Unpaid interest will also capitalize each year until your total balance is 10% higher than the original balance. This means you will pay interest on your interest.
By forgoing nearly $5 billion a month in interest, the federal student loan program swung from a profit to a loss even in the most optimistic of projections. Let's take a tour of how the federal government's budget calculates the subsidy rates for various federal programs.
Student loans are typically disbursed directly to the educational institution to cover tuition, fees, and other costs. Any excess funds from the loan after covering direct educational costs are usually paid to the student. Disbursement generally occurs around the start of the academic semester.