Note: It is highly unlikely that your student loans would be discharged in your bankruptcy case, but here is some information that will help you manage your student loans more effectively.
Federal vs. Private Loans
Student loans come in two varieties—Federal and Private
Federal Loan
Federal student loans are not dependent on credit worthiness (with the notable exception of parent “PLUS” loans). Rather, the information on a student aid application is plugged into complicated formula to determine eligibility. Prior to July 1, 2010, there were two sources of federal student loans: (1) Direct Loans, and (2) Federal Family Education Loans (FFEL’s). FFEL loans are no longer offered, although many FFEL loans are still in repayment. Private Private student loans originate with private lenders and are based on your credit worthiness, just like most other kinds of consumer loans such as a car loan or a credit card. In other words, to get a private student loan you must have good credit. The difference between private student loans and these other kinds of consumer debts is that, as of October 17, 2005, most private student loans cannot be discharged in bankruptcy.
Private Loan
Private student loans originate with private lenders and are based on your credit worthiness, just like most other kinds of consumer loans such as a car loan or a credit card. In other words, to get a private student loan you must have good credit. The difference between private student loans and these other kinds of consumer debts is that, as of October 17, 2005, most private student loans cannot be discharged in bankruptcy.
What Our Clients Say
Is My Loan Federal or Private?
In order to determine if we can help you with your student loans, we first have to find out whether your student loans are “federal” or “private”. Federal loans – including Direct Loans from the U.S. Department of Education, loans placed for collection with guarantee agencies, and those originated by the schools themselves (aka “Perkins” loans) – may provide us with certain options that are not available with private loans.
Federal Student Aid Information Center
If you do not have access to the internet, you can call the Federal Student Aid Information Center at 1-800A-FED-AID or 1-800-730-8913 to speak with a staff member to find out what type of loan you have.
National Student Loan Data System (NSLDS)
To find out if your student loan is federal or private, you need to go to the National Student Loan Data System. This website will give you all of the information you need to know about your federal loans, including original amount of loan or grant, current balance, loan status, and disbursements.
Types of Federal Loans
There are three main types of Federal student loans: Stafford (both subsidized and unsubsidized), PLUS (Parent Loans for Undergraduate Students), and Perkins
Stafford Loans
The government pays the interest on “subsidized” loans while you are in school and during periods of deferment, but you pay the interest after you graduate. “Unsubsidized” means that the interest on your loans accrues even during periods when the loan is in deferment such as when you are still in school. This interest is then added to the amount that you will have to repay after graduation.
PLUS Loans
PLUS Loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses. The U.S. Department of Education makes Direct PLUS Loans to eligible borrowers through schools participating in the Direct Loan Program.This is the only kind of federal loan in which eligibility is based on credit worthiness.
Perkins Loans
Perkins Loans are funded directly by the school and are repaid directly to the school that made the loan. In some cases the school may hire a debt collector to collect the loan if the loan is in delinquent status. Alternatively, the school might transfer the loan to the U.S. Department of Education for collection