What are Student Loans

In this article we are going to explore what a student loan is, types, servicers, eligibility requirements and a detailed explanation on the process of applying and accessing student loans.

What is a Student Loan?

A student loan serves as a form of financial assistance aimed at supporting students in covering the costs associated with post-secondary education, which may include tuition fees, textbooks, and living expenses. Generally, these loans are extended by either governmental bodies or private financial organizations, with the requirement that they are to be repaid with interest once the student finishes their studies or discontinues their enrollment. Student loans can take on different structures, such as federal loans (issued by the government) and private loans (offered by banks or other financial entities), each with varying terms and conditions like interest rates and repayment plans based on the lender and the specific loan type.

The primary purpose of student loans is to alleviate the financial burden on individuals pursuing higher education by providing them with the necessary funds to cover educational costs. By offering students access to these financial resources, they can focus on their studies without being overly concerned about the financial aspect. It is essential for students to carefully consider the terms and conditions of the student loan they are considering, as well as explore all available options to ensure they make an informed decision that aligns with their financial circumstances and future repayment capabilities.

Types of Student Loans

There are two main types of student loans namely federal student/federal direct student loans and private student loans. lets explain further:

Federal Direct Student Loans

Federal Direct Loans are offered by the U.S. Department of Education and consist of Subsidized, Unsubsidized, and PLUS loans. Subsidized loans are awarded based on financial need, with the government paying the interest during the borrower’s time in school. Unsubsidized loans are accessible to both undergraduate and graduate students, but interest starts accumulating as soon as the loan is distributed.

Types of Federal Direct Student Loans

  1. Subsidized federal loans
  2. Unsubsidized federal loans
  3. PLUS Student loans

Private Student Loans

Private student loans are provided by private financial institutions like banks, credit unions, or online lenders. They generally come with higher interest rates than federal loans and may necessitate a credit check or a co-signer. The specific terms and conditions of private loans differ based on the lender, and they might present alternative repayment choices and borrower advantages in contrast to federal loans.

Types of Private Student Loans

  1. Undergraduate private loans
  2. Graduate private loans
  3. Parent loans

Student loans come in different forms depending on your requirements, it is important to know what type of loan is right for you. we have complied a list of private student loan lenders below:

Private Student loan Lenders

Private student loan lenders are companies that provide private student loans to lenders, here are some important lenders:

  1. College Ave
  2. Sallie Mae
  3. Earnest
  4. SoFi
  5. Citizens Financial Group
  6. Custom Choice
  7. Funding U
  8. LendKey

This is not an exhaustive list as there are other private lenders that provide private student loans to lenders.

What Are Student Loan Servicers?


Student loan servicers are companies tasked with handling the administrative duties related to student loans on behalf of the lender or loan holder. These responsibilities typically involve tasks like sending out bills, collecting payments, processing deferments and forbearances, guiding borrowers through repayment plans, overseeing loan consolidation, and managing various aspects of borrower communication and account upkeep.


In the case of federal student loans, the U.S. Department of Education collaborates with multiple loan servicers to oversee these loans. These servicers engage directly with borrowers to ensure they comprehend their repayment choices and assist them in navigating the repayment journey. Some prominent federal student loan servicers include Navient, Nelnet, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, and MOHELA.


Private student loans, on the other hand, may be managed by private companies that have been contracted by the lender or issuer of the loans. These servicers carry out similar functions to those handling federal loans, such as managing payments and aiding borrowers with inquiries about their accounts and repayment alternatives. Ultimately, student loan servicers are pivotal in facilitating effective communication between borrowers and lenders, providing the necessary assistance and tools for borrowers to effectively handle their student loan obligations.

Types Of Student Loan Servicers

  1. Aidvantage
  2. Edfinancial Services
  3. Great Lakes
  4. MOHELA
  5. Nelnet
  6. OSLA
  7. American Education – Services manages only FFEL Program debt.
  8. Default Resolution Group – Services only federal student loans in default.
  9. Heartland ECSI – Services borrowers with federal Perkins loans.

Eligibility Requirements For Obtaining Student Loans

Here are some important eligibility requirements for obtaining student loans:

  1. Demonstrate financial need
  2. Be a U.S. citizen or eligible noncitizen
  3. Have a Social Security number
  4. Enroll in an eligible degree or certificate program
  5. Make satisfactory academic progress
  6. Have qualifications needed for your program

When To Apply For Student Loans

  1. Federal student loans require completion of the FAFSA to apply, necessitating adherence to the FAFSA deadline. The deadline is June 30. It is important to note that certain financial aid is distributed on a first-come, first-served basis, underscoring the importance of submitting the FAFSA early, particularly for those with significant financial need.
  2. Private student loans do not have an application deadline, unlike federal student loans. However, the approval process may take approximately three weeks from the submission of your application until you receive the funds. In some cases, it could take up to one or three months if there are any delays. Therefore, it is advisable to apply for a private student loan as early as possible to ensure you have ample time.

Bottom line

Student loans are financial resources that students borrow in order to finance their higher education expenses, including tuition fees, textbooks, and living costs. These loans can be categorized into two primary types: federal loans, which are granted by the government, and private loans, which are offered by banks or other lending institutions. Federal loans generally have lower interest rates and more flexible repayment plans, whereas private loans often require a credit check and tend to have higher interest rates.

Categories: Guides

David Brown

He is a writer covering financial news and trends. He has over 7 years of experience as a finance writer. He and his team are dedicated in providing a comprehensive resource for students and parents to make choices based on accurate and latest information in the student loan space.

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