Student Loans

Federal Loans, Private Loans, and How to Tell the Difference

With the high cost of attending college, many students and their families have had to take out one or more student loans. When students graduate, decent-paying jobs are not always available. As a result, many borrowers report difficulty repaying their student loans, and loan servicers and debt collectors are not always easy to work with. The following information is for anyone seeking to repay student loans.

Know Your Loansexternal link icon 

The first thing you should do if you have difficulty repaying a student loan is to determine what kind of loan you have. This will affect your rights. There are two main types of student loans: (1) federal student loans—which are guaranteed or issued by the federal government, and (2) private or non-federal student loans—which are issued by private lenders, a state agency, or by the schools themselves.

Federal Student Loans

The largest provider of student loans is the U.S. Government.The largest provider of student loans is the U.S. Government. Today, federal student loans are issued directly from the U.S. Department of Education. The federal government is your lender, unlike the past when the federal government guaranteed the loans, but used private lenders as “middlemen” to issue the loans. The U.S. Department of Education has four types of federal student loan programs: Direct Loans, Direct PLUS Loans, Direct Consolidation Loans, and Perkins Loans:

Federal Direct Subsidized and Direct Unsubsidized Loans

Federal Direct Subsidized and Direct Unsubsidized Loansexternal link icon are the largest federal student loan program, often referred to as Stafford Loans or Direct Stafford Loans:

Direct PLUS Loans

Direct PLUS Loansexternal link icon are available to parents of undergraduate dependent students, and to graduate or professional degree students. PLUS loans assess a loan fee that is proportionately deducted from each loan disbursement. Interest is charged during all periods and PLUS loans require a credit check.

Direct Consolidation Loans

Direct Consolidation Loansexternal link icon allow consolidation of eligible federal loans into one loan with a single loan servicer after the borrower leaves school. Private loans and parental loans cannot be consolidated into a Direct Consolidation Loan.

Federal Perkins Loans

Federal Perkins Loansexternal link icon are low-interest loans for undergraduates and graduate students who demonstrate exceptional financial need. Under this program, the school is the lender. The Perkins Loan Program expired in September 2017 for new borrowers. If you have questions about a Perkins Loan, contact your school’s financial aid office or the U.S. Department of Education at (800) 433-3243 or (866) 313-3797 for more information.

Non-Federal Loans—Private or State Student Loans

Private student loans are any other type of student loans that are not federal loans. Banks, credit unions, state agencies, colleges, universities, and post-secondary institution all make private loans. Private loans are generally more expensive than federal student loans, and usually offer few repayment options and fewer default protections. In Minnesota, there are two types of non-federal student loans:

Private Loans

Private Loansexternal link icon may be offered by private financial lenders, such as a bank or credit union or offered directly by a school. In general, private loans are more expensive than federal student loans, and eligibility often depends on your credit history. Many private student loans require a cosigner and require payments while you are still in school. The interest on private loans may be variable. A variable interest rate means the rate can go up as interest rates in the marketplace rise. A higher interest rate means higher monthly payments and bigger loan balances. There may be fewer protections and fewer repayment options for private student loans as compared to federal student loans.

SELF Program

The Minnesota Student Educational Loan Fund (SELF) Programexternal link icon is a long-term, low-interest educational loan from the Minnesota Office of Higher Education, a state agency. The loan program is only for Minnesota residents, and a cosigner is required. Before you apply for the SELF Loan, be sure to look into any federal education loans for which you may be eligible. In general, SELF loans do not have as many benefits or repayment options as federal student loans. For information on the Minnesota SELF Loans, contact the Office of Higher Education as follows:

Minnesota Office of Higher Education
1450 Energy Park Drive, Suite 350
St. Paul, MN 55108-5227
(651) 642-0567 link icon

How to Determine Your Loan Type

You may have more than one student loan, or may have both private and federal student loans. The following may assist you in compiling and tracking your loan information and planning for repayment of your loans:

Keep Track of Your Loansexternal link icon

Keep copies of your student loan papers. It is important to keep track of the lender, loan servicer, balance, and repayment status for each of your student loans. These details help determine your loan repayment and other program options.

Federal loans

You can obtain a list of your federal loans by visiting the NSLDS Database.Visit the National Student Loan Data Systemexternal link icon (NSLDS) to get a list of all your federal student loans. The NSLDS is the U.S. Department of Education's central database for all federal student loans. It receives data from schools, guaranty agencies, the Direct Loan program, and other U.S. Department of Education programs. The NSLDS tracks federal student loans from the time you apply to the time you complete repayment. All federal student loans can be found through this database. You may contact the NSLDS as follows:

National Student Loan Data System
(800) 4-FED-AID (800-433-3243) link icon

Non-federal loans

If you cannot locate your loan through the NSLDS, you probably have a private or state student loan. To locate more information about your private student loans, try viewing a free copy of your credit report,external link icon get in touch with your school’s financial aid office, or contact the Minnesota Office of Higher Educationexternal link icon to see if they can help you to identify your student loans.