Know Who’s Who in the Student Loan World

With Thanksgiving just around the corner, many of us will soon have large get-togethers with family and friends to celebrate. These gatherings have the Student Loan Ranger picturing the “extended family” of a student loan. You’d need a big table to seat them all.
It’s always awkward to make small talk with your great aunt or second cousin if you don’t actually know who they are. To avoid a similar fate when you run into a member of your loan’s family, let’s make sure you’re familiar with what each one does.
* William D. Ford Federal Direct Loan Program: As of July 1, 2010, all federal student loans are originated through the direct loan program. These loans include Stafford loans and PLUS loans, and the U.S. Department of Education serves as their sole lender.
* Federal Family Education Loan Program: Before July 1, 2010, students could borrow federal student loans through the federal direct loan program or through FFELP. The biggest difference between the two is that FFELP allowed students to borrow from a private lender, not the federal government.
Many federal student loan benefits, including some income-driven repayment plans, are restricted to direct loan borrowers only. However, FFELP borrowers have the option to consolidate their loans into direct loans to become eligible for these options. They can also access the “original” income-based repayment without consolidating.
[Learn 11 terms you need to know before repaying loans.]
* Your school: Your school always starts the financial aid process. Their financial aid office will determine your eligibility for aid, as well as award your federal student loans. This information will be included in your award letter.
Once you decide which loans to accept, and remember to think about the future when doing this, the school will originate your loans and schedule their disbursements. That means they determine how much of each loan you receive at a time and when.
* Your lender: This is who provides your loan funds. Within the direct loan program, your lender will always be the Department of Education. They’ll send the money to the school, which credits it to your account.
Your school can also act as your lender, both for institutional aid and federal Perkins loans. Funding for new Perkins borrowers, however, has ceased.
For private student loans, a nonfederal financial institution such as a private bank or credit union acts as your lender. They will disburse your loan and set the terms and conditions for it. Your school will not facilitate this process, but they will certify that the loan amount won’t be higher than your cost of attendance.
* Your servicer: While lenders provide the money, they often outsource the day-to-day management of your loan to a servicer. These organizations provide services like sending bills, collecting payments and providing customer service.
If you have questions about your bill or repayment options, contact your servicer. Servicers can also change frequently, so make sure yours has up-to-date contact information for you.
[Check out this guide to understanding student loan servicer changes.]
* Collection agency: If your student loans default, your lender, servicer, or the Department of Education may hire a collection agency. These companies specialize in the collection of delinquent or defaulted loans.
* Guarantor: A guarantor is a nonprofit or state organization that works with your lender, servicer, school, and the Department of Education to help you successfully repay FFELP loans. If your FFELP student loans default, your guarantor takes ownership of them. Guarantors are not part of the direct loan program.
* Ombudsman: The Federal Student Aid Ombudsman Group helps borrowers resolve disputes about their federal student loans. If you can’t resolve a dispute with your loan holder in any other fashion, contact the ombudsman.
* Consumer Financial Protection Bureau: The CFPB serves as a financial services industry watchdog. For Study Loan, they track complaints made against lenders and servicers. They do this to provide information that can help borrowers choose service providers with good reputations. They also spot trends and suggest solutions to improve service to borrowers
Borrowers can file disputes on the CFPB website. The CFPB has its own ombudsman, who will work with borrowers and their lender to resolve private loan issues.
* National Student Loan Data System: Like we said, you need a pretty big table to accommodate your loan’s family. Fortunately, this federal database offers some figurative place cards and simplifies things for you.
The NSLDS website lists all of your federal student loans, as well as who holds them. If your loan was a part of FFELP, your guarantor will be listed. If you only have a Department of Education servicer listed, your loan is part of the direct loan program.
Source: http://www.usnews.com/education/blogs/student-loan-ranger/2015/11/25/understand-the-many-facets-of-the-student-loan-process