Types of Student Loans
There are many different types of student loans. Most student loans are federal government loans. Since 2010, most of these loans are made directly by the government. This is known as the Direct Loan Program. There are also many older loans made by private lenders, but guaranteed by the government.
The good news about the federal government loans is that there are many different programs available to help you if you are having trouble repaying these loans. There are even ways to cancel these loans in limited circumstances. The bad news is that the federal government has extraordinary powers to collect student loans if you default. These powers, such as tax refund and federal benefits offsets, have no time limit.
There is also a separate private student loan market. Banks and other financial institutions make these loans without any financial backing from the federal government. Private loans can be very tempting given the soaring costs of higher education. However, you should be very careful if you are considering taking out a private loan. Among other problems, there are no interest rate limits on private loans as there are for government loans. Private loans also do not have the same range of flexible repayment and other borrower protections that government loans have.
Total Federal and Nonfederal Loans in 2015 Dollars by Type, 1995-96 to 2015-16
Students and parents borrowed $106.8 billion in education loans in 2015-16, down from a peak of $124.2 billion (in 2015 dollars) in 2010-11.