About Student loans

Student loans

Paying for your studies can be a big responsibility. Understanding the difference between a federal and a private loan and your debt consolidation and repayment options can save you thousands of dollars.

Some companies promise to help you reduce your student loan debt, but all they can do is free of charge. And some of the companies that promise to ease your student loan debt are scams. It is illegal for a company to charge you before helping you.

How to finance your education
Payment and forgiveness of loan debt
Loan consolidation
Signs of fraud in student loan debt relief offerings
Report fraud
How to finance your education
There are several types of help available to pay for your education after high school, including grants and scholarships, federal work-study jobs, and student loans.

Grants and scholarships

Grants and scholarships are free money. They should be your first option to finance your education. Why? Because you should not pay them. A good way to apply for a grant is through the FAFSA form. You can also explore these other resources to find out about scholarship and grant opportunities:

the financial aid office at a university or vocational school
a high school or TRIO counselor
the free scholarship search tool from the US Department of Labor
federal agencies
your state
your library
foundations, religious or community organizations, local companies or civic groups
organizations related to your field of interest, such as professional associations
ethnicity-based organizations
your employer or your parents' employers
Federal Work-Study Jobs
Federal work-study jobs are another way to help pay for college. This type of employment is a needs-based allowance, which requires you to work part-time while studying. To qualify for a work-study job, you must complete the FASFA form and meet the program's "needs-based" criteria. You will only be paid for the hours you work.

Student loans
Student loans fall into two categories: federal loans and private loans.

Federal loans include:

Direct loans, where the US Department of Education. USA is the lender;
Federal Family Education Loans (FFEL), where private lenders make loans backed by the federal government;
Federal Perkins Loans, low-interest federal student loans for undergraduate and graduate students with exceptional financial needs; and
PLUS loans, federal loans that can be used by graduate or professional students and the parents of dependent undergraduates to help pay for college or vocational school.
Private loans, sometimes called "alternative loans," are offered by private lenders, such as banks and savings cooperatives, and do not include the benefits and protections offered by federal loans.

Payment and forgiveness of loan debt

Student loans are a debt that you must pay, even if you don't finish your degree. However, depending on your situation and the type of loan you have, you may be eligible to make a different payment plan or to receive forgiveness of your loan debt. And when it comes to qualifying for these programs, there's nothing a private company can do for you that you can't do for yourself for free.

Federal loans

If you have federal loans, the Department of Education has free programs that could help you, including:

payment plans based on your income: your monthly payment is based on the amount of money you earn
deferred or grace payment: you can postpone payments, if you have a good reason not to do it right now, although this would mean that the interest on what you owe increases
Debt Forgiveness or Waiver: In some situations, you do not have to pay part or all of the debt on your loans. You may qualify if, for example, you work for a government or non-profit organization, if you have a disability, or if your university or school closed or committed fraud. Also, under certain income payment plans, any balance remaining after 20 or 25 years of payment is forgiven. In some cases, you may owe income taxes on the amount forgiven or waived.

Private loans

With private loans, you typically have few repayment options, especially when it comes to forgiveness or cancellation of loan debt. To explore your options, contact your loan collector directly. If you don't know who your collector is, see your latest loan statement.

Loan consolidation

Consolidating your student loans means combining multiple loans into one. Typically, people consolidate their loans to simplify monthly payments or to receive new payment terms. When you consolidate your loans, you receive a new loan with new terms and conditions.

If all of your education loans have fixed interest rates, it doesn't matter when you consolidate the loans. If some or all of your loans have variable interest rates, when you consolidate your loans into one at a fixed rate, that could affect the interest rate on your loan.

Federal loans

Consolidating federal loans with the federal government is free. There are companies that offer help to help you consolidate your federal loans with the federal government for a fee, however you do not have to pay for this service. Consolidating loans with the federal government is a process that you can do alone, at no cost.

When you consolidate your federal student loans, you receive a Direct Consolidation Loan, with a fixed interest rate for the entire term of the loan. The fixed rate is the weighted average of the interest rates of the loans to be consolidated.

You must make sure that it makes sense to consolidate your loans. Consolidating a low interest Perkins loan may not be favorable for you. Perkins loans have deferment and cancellation rights that you could lose if you include them in the consolidation.
Signs of fraud in student loan debt relief offerings
You've probably seen advertisements from companies that promise to help you with your student loan debt. Here's what you should know: There is nothing a company of this type can do for you that you cannot do for yourself at no cost. And some of the companies that promise to ease your debt are scams.

Never pay anything upfront. It is illegal for a company to charge you before helping you. If you pay up front to reduce or end your student loan debt, you probably won't get any help or your money back.

Only importers promise quick debt forgiveness. Before knowing the details of your situation, importers may tell you that they can quickly relieve your debt through a debt forgiveness program - programs that most people don't qualify for. Or they could tell you that they can eliminate your debt by disputing those debts. However, they cannot do either.

A stamp from the Department of Education does not mean that what you see is legitimate. Importers use official-looking names, stamps, and logos, telling you they have access to certain debt repayment plans, consolidations under a new federal loan, or loan debt forgiveness programs.

Do not rush to make a decision. To get you going fast, importers tell you that you may miss out on this opportunity to qualify for a repayment plan, loan consolidation, or loan debt forgiveness program if you don't sign up right away. Take all the time in the world and find out.

Dishonest people can use that information to log into your account and take control of your personal information.