Federal Student Loans: A Primer

I will preface this post by saying that I was very fortunate not to have to take out student loans for undergrad.  Therefore, I know very little about the student loan process for college loans.  However, I do have a hefty six-figure balance from medical school, and I will be talking about those loans a lot here on this blog.

I am very fiscally conservative; I always pay my credit card balance in full every month and I’m generally pretty risk averse.  Therefore, my student loan debt is very stressful for me.  I did try to minimize my debt as much as possible by limiting the loans that I took, but I largely ignored the issue during medical school.  Over the last few months I have been much more proactive about learning about my loans.

The first important thing to understand about your loans is where all that money came from.  As you enter the repayment period you need to understand who you need to pay.  Generally graduate student loans are provided by banks or the federal government.  Direct student loans are paid directly from the Department of Education.  Federal Family Education Loan (FFEL) student loans come from banks, but are backed by the US government.  For federal student loans these are the two main lenders.

However, when you need to pay back your student loans you don’t called up the Department of Education.  Each loan has a servicer, which is basically a company that performs the billing functions on behalf of the lender.  Sometimes the lender and the servicer are the same, and sometimes they are not.  The servicer will send the monthly bill, and you will send a check to the servicer.

Unfortunately, most students will have more than one lender.  I have 3 different lenders, and I will get individual bills for the loans of each of those lenders every month.  It is really important to know who your lenders are and who your servicers are, and be prepared for all of those bills when they come!