More than 44 million Americans currently carry student loan debt. While the vast majority of new student loans come directly from the U.S. Department of Education and have terms and conditions set by the federal government, some students and their families borrow money from private lenders such as banks and credit unions.
It’s important to understand the differences between federal and private loans and to know your rights and protections as a borrower. Federal student loans typically offer better terms and consumer protections than private loans, so you should be sure to exhaust those options before turning to private loans.
A number of federal laws govern what rights you have as a student loan borrower and what rules lenders must follow, including the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Federal Trade Commission Act and the Consumer Financial Protection Act. These laws together provide a number of protections for all consumers, including student loan borrowers.
Below is information about benefits you can access as a student loan borrower, including options if you’re struggling to make payments, circumstances under which your debt can be discharged, what rights you have if your loan is sent to a debt collector and how to find additional help.
Understand Your Repayment Options
Federal student loan borrowers have a number of flexible repayment plans to choose from, including the option to make payments based on a percentage of their income. Income-driven repayment plans are meant to keep monthly payments more affordable, with any remaining debt forgiven after 20 or 25 years of repayment.
Borrowers of federal student loans can also get shorter-term relief with a forbearance or deferment, which pauses loan payments for a time. While it’s best not to use these options for a lengthy period, as interest can continue to accrue, they are key safety nets to keep in mind if you’re struggling financially. To access these options, contact your loan servicer, who can help you enroll in an income-based repayment plan, forbearance or deferment if you qualify.
Private student loans offer fewer repayment options than federal loans, and most private lenders do not offer a grace period before repayment begins or income-driven repayment plans. Some private lenders offer repayment, forbearance and deferment options. To explore them, contact your private student loan lender directly.
Know if You’re Eligible for Debt Forgiveness
There are certain situations where your loans may be eligible to be forgiven. Under the Public Service Loan Forgiveness program, for example, federal student loan borrowers who work full time for a qualifying employer can have their balance forgiven after making 120 qualifying monthly payments, which must be made under an approved repayment plan.
There is also a federal program called “borrower defense to loan repayment forgiveness” — more commonly known as borrower defense — that offers students partial or full relief from federal student loans based on fraudulent, misleading or illegal acts by their school. A claim for that can be filed at StudentAid.gov.
Federal student loans are also forgiven if the borrower dies, and can be forgiven if a borrower has a permanent disability.
Private student loans may be forgiven upon the borrower’s death or become part of the borrower’s estate, depending on the lender and type of loan. If the loan has a co-signer, he or she is usually responsible for the remaining debt unless the lender’s policy stipulates otherwise.
However, for private student loans taken out after Nov. 20, 2018, a co-signer is released from obligation if the student borrower dies, thanks to a provision in the federal Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in 2018.
Know Your Debt Collection Rights
If you find yourself in the unfortunate situation of your student loan debt defaulting and going into collections, be aware that debt collection for both federal and private loans is regulated by the federal Fair Debt Collection Practices Act, which makes it illegal for a debt collector to mislead or harass you. Debt collectors can’t engage in illegal practices and are required to validate that you owe the debt they’re attempting to collect.
If you think your rights are being violated by a debt collector, you should report it to a governmental agency such as your state attorney general’s office, the Federal Trade Commission or the Consumer Financial Protection Bureau.
Other Helpful Resources
If you’re having any type of issue with a federal student loan that you can’t resolve by yourself or with the help of your servicer, you have a number of options for resolving the dispute, including contacting a student loan ombudsman. That person’s job is to listen to your complaint, conduct research and help you identify options for resolution.
You can also reach out to consumer advocacy organizations that work on behalf of student loan borrowers, such as the National Consumer Law Center’s Student Loan Borrower Assistance Project or Harvard Law School’s Project on Predatory Student Lending.
Remember that you can also contact your state and federal elected officials, who may be able to help you resolve your concerns.
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