Student loan debt often follows a borrower for much of his or her life.
Though it is difficult to fully understand what student loans mean as
a college student, many people who take out large amounts of student loans
realize that they will be paying them off for the next several decades.
What many students do not realize is that the type of student loans that
they use can have a serious impact on their rights and responsibilities
after their education is completed. If you or your child will be taking
out loans for school, make sure you understand the differences between
private and federal student loans.
Federal student loans are the most common types of loans. These loans are
funded and backed by the United States government and offer many benefits.
For instance, federal student loans offer fixed interest rates and income-based
repayment plans. They also are generally not due until a student graduates
or stops attending school.
Low-income students may also qualify for subsidized federal loans where
the government pays the interest while the student is attending school.
Most federal loans also do not rely on credit scores, which allows students
to take out loans even if they (or their parents) have poor credit or
little credit history.
In comparison, private student loans are financed by banks and private
companies rather than the federal government. The interest on these loans
is not subsidized and is often calculated at a much higher rate than federal
student loans. These loans also use credit checks and often require a
co-signer who will agree to make the payments if the borrower cannot.
The biggest difference between federal and private student loans comes
after graduation. With a federal student loan, students who have trouble
paying may be able to temporarily postpone or lower their payments. They
also may be eligible to have portions of their student loan debt forgiven
if they work in public service and meet other qualifications.
In contrast, private student loans offer none of these protections. If
a student is having trouble making the payments, the private student loan
company has no obligation to reduce or suspend payments. If the payments
are not made on time, the private student loan company will pursue that
student using standard debt collection techniques. Additionally, since
most private student loans require a co-signer, the student loan company
will aggressively pursue payment from that person or persons as well.
In fact, the co-signer on that student loan can be pursued indefinitely,
even if the student borrower dies.
When considering taking out student loans, always be sure to borrow only
what you need. If possible, try not to rely on private student loans as
these loans do not offer forbearance, postponement, or consolidation options.
Neither private nor federal student loans can be discharged in bankruptcy
except in extreme circumstances, so it is important to borrow money for
schooling on terms that you can live with throughout the time for repayment.
If you are being harassed due to student loan debts, we can help. At Loan
Lawyers, we can talk you through your legal options and create a strategy
that will help you with your student loan debt issues. Call our firm at
(888) FIGHT-13 (344-4813) for a free case consultation with one of our