Key Players in the Loan Process
Knowing who's who in the loan process will help you keep in touch with the right people as you work to repay your student loan. Good communication is the key to successful loan repayment and a great credit reputation. Here are the key players you may need to contact:
Financial Aid Administrator
The financial aid administrator at the school you're planning to attend will help you determine which loans you're eligible for. This is your best source for information about your loan and other potential financial aid.
Federal Government
The government offers the Federal Family Education Loan Program (FFELP), the Federal Direct Loan Program, and the Federal Perkins Loan program. As such, loan terms, interest rates, eligibility factors, repayment criteria and other requirements are established by the federal government and overseen by U.S. Department of Education. Stafford loans are either unsubsidized (interest is charged beginning the day the loan is disbursed) or subsidized (the government pays for interest accrued up through graduation day, during the grace period, and during any periods of deferment).
Lender
The lender is the actual source of the money you borrow. It may be a bank, savings and loan, or credit union. While the lender makes the loan, it can decide to either keep the loan until is paid off, sell it to a secondary market, or keep the loan and contract with a servicer to handle the paperwork. since all lenders manage loans differently, borrowing all school loans through one lender will help simplify repayment.
Secondary Market
The secondary market includes private companies that purchase student loans from the original lender. The original lender than takes the money it receives from the loan payoff and lends it to another student. When a loan is "sold" to the secondary market, loan terms do not change, although secondary market purchasers may offer attractive interest rate reductions or rebates.
Servicer
The servicer is hired by the lender or secondary market to mange the day-to-day details of tracking and collecting loan payments. So, while your loan may still be owned by the original lender, a servicer processes payments, tracks address changes, deferments, billing, and so on. It's important to know your servicer!
Guarantor
The guarantor is an agency like the California Student Aid Commission that guarantees to the lender that a loan will be repaid. Guarantors may be state agencies or private companies that can charge up to a 1% fee for the service. The guarantor keeps a record of all loans it guarantees, and also collects on defaulted loans.
Credit Bureau
A credit bureau maintains a credit history on anyone who has ever borrowed money. As such, your student loan record becomes part of your permanent credit history - good or bad. When you consider borrowing for a future purchase like a home or a car, the seller will likely request a credit report from a national credit bureau.