You
You
You are the borrower-and ultimately
responsible for repaying your student loan according to the terms
outlined in the promissory note you signed when
you accepted the loan. This promissory note is a binding
legal contract that details your repayment obligations,
interest rates, and other important loan terms.
By signing it, you've agreed to meet those
terms, even if you don't finish your program, can't find a job
right away, or are dissatisfied with the education you
received.
Your College/University
Your College/University
The college or university you plan to attend
creates your financial aid package-including any
Federal Direct Loans-using the information from your FAFSA. Your
school is also responsible for certifying your student loan
eligibility and submitting that certification to the U.S.
Department of Education or your lender.
In addition, your school monitors your
enrollment status (such as full-time, part-time, or
withdrawn) and reports changes to your loan servicer, since these
can affect your financial aid and repayment timelines.
U.S. Department of Education
U.S. Department of Education
The U.S. Department of Education's
Federal Student Aid (FSA) office oversees the
federal student loan system. All new federal student loans are made
through the William D. Ford Federal Direct Loan
Program. FSA sets the rules, eligibility criteria, and
repayment terms for these loans. It also manages federal financial
aid processing, administers aid programs, and ensures schools and
loan servicers comply with federal law.
Your College/University
Your Lender
For federal student loans,
the lender is the U.S. Department of Education, which issues all
new loans through the William D. Ford Federal Direct Loan Program.
You borrow directly from the federal government, and your loan is
serviced by a company contracted by Federal Student Aid (FSA).
For private student loans,
the lender is usually a bank, credit union, state-based agency, or
other private financial institution. These loans are not funded or
guaranteed by the federal government, and terms, such as interest
rates, repayment options, and borrower protections, are set by the
lender.
Servicer
Servicer
Lenders sometimes hire a loan
servicer to manage their student loan accounts. The
servicer is your main point of contact for questions, billing, and
repayment-but they do not own your loan. The
lender (such as the U.S. Department of Education for federal loans)
still holds the loan, while the servicer handles the day-to-day
management.
Secondary Markets
Secondary Markets
Think of a secondary market as a "loan buyer."
Your lender might sell your loan to one of these buyers so they
have more money to lend to other students. If this happens, the new
owner of your loan is called the loan holder, and
they'll keep your loan until it's paid off or sold again.
If your loan is sold, both your original
lender and the new holder are required to notify you in writing.
Your loan terms, such as interest rate and repayment schedule, will
not change when the loan is sold.