There are two types of loans: Federal and Private.

Federal student loans are provided by the government and have set terms and conditions defined by law. They offer benefits such as fixed interest rates and income-driven repayment plans, which are not typically available with private loans.

On the other hand, private loans are offered by private organizations like banks, credit unions, and state-affiliated entities. They have terms and conditions determined by the lender and are generally more expensive than federal loans.

Loan Types:

Direct Subsidized Loan: Available to undergraduates with demonstrated financial need. The loan amount depends on the number of years in school, starting at $3,500 for freshmen, with a fixed interest rate of 4.53% APR.

Direct Unsubsidized Loan: Available to undergraduates, graduate students, and professional students without financial need. The loan amount increases each year of college, starting at $5,500.

PLUS Loan: Available to parents of dependent undergraduates, graduate students, and professional students. PLUS loans have a fixed interest rate and require a credit check. Parents take out these loans on behalf of their children, and repayment must begin immediately without a grace period.

Direct Subsidized Loans: Loans provided to eligible undergraduate students with demonstrated financial need to cover higher education costs at a college or career school.

Direct Unsubsidized Loans: Loans available to eligible undergraduate, graduate, and professional students, regardless of financial need.

Direct PLUS Loans: Loans offered to graduate or professional students and parents of dependent undergraduate students to cover education expenses not covered by other financial aid. Credit check is required, and additional requirements apply for borrowers with adverse credit history.

Direct Consolidation Loans: Loans that allow you to combine eligible federal student loans into a single loan with one loan servicer.

You can find out whether your loan is federal or private by following these steps:

1. Check the top of your federal loan promissory notes, applications, and billing statements. These documents usually mention the name of the federal loan program at the top. Federal loan programs include the William D. Ford Federal Direct Loan Program, the Federal Perkins Loan Program, and the Federal Family Education Loan (FFEL) Program.

2. Log in to StudentAid.gov using your FSA ID (account username and password). Under your name, select "My Aid." The My Aid section displays information on federal loan and grant amounts, outstanding balances, loan statuses, and disbursements.

Currently, student loan debt relief is not available. However, in response to the economic challenges caused by the pandemic, the Biden-Harris Administration has extended the pause on student loan repayments multiple times. As a result, borrowers with federally held loans have not been required to make any payments since President Biden took office.

The U.S. Department of Education offers debt relief up to $20,000 for Pell Grant recipients with loans held by the Department of Education, and up to $10,000 for non-Pell Grant recipients.

To be eligible for this relief, individual borrowers must have an income of less than $125,000, or $250,000 for households.

Furthermore, borrowers employed by nonprofits, the military, or federal, state, tribal, or local government may qualify for complete student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program.

Subsidized loans are available to students with financial need, and the government covers the interest while the borrower is in school or during deferment periods.
Unsubsidized loans, on the other hand, are not based on financial need, and the borrower is responsible for all interest accrued throughout the loan period.

Income-driven repayment plans are designed to make loan payments more manageable based on borrowers' income and family size. These plans typically cap the monthly payment at a certain percentage of the borrower's discretionary income, potentially providing more affordable repayment options.

Defaulting on a student loan can have serious consequences, including damage to credit scores, wage garnishment, and legal actions. It is important to explore available options, such as deferment, forbearance, or income-driven repayment plans, to avoid defaulting on student loans. Defaulted loans are not eligible for income driven options. We recommend that borrowers review the following Fact Sheet from Federal Student Aid for details on the Fresh Start program for borrowers with loans in default.

The grace period is a period of time after graduation, withdrawal from school, or dropping below half-time enrollment when borrowers are not required to make loan payments. Understanding the length and conditions of the grace period allows borrowers to plan for future loan repayment obligations.

Refinancing or consolidating student loans involves combining multiple loans into a single loan with potentially new terms and interest rates. Exploring refinancing or consolidation options can help borrowers simplify their repayment process or potentially obtain more favorable loan terms. However, refinancing your loans means you lose federal benefits.