So Who the Heck Owns My Student Loan?
November 2, 2011

One of the most frustrating things about student loans is that sometimes it seems as though there are a dozen different companies or entities involved in one, single loan. When you have multiple student loans, each with multiple companies involved in one way or another, figuring it all out can be a bit… tedious. Understanding the roles that different entities play in the student loan world might be helpful, so let me try to de-mystify things a bit.


Lender. The lender is the original entity that actually gave you the student loan. You borrowed from the lender, you signed a promissory note issued by the lender, and you have to repay the lender. For private loans, the original lender could be a private company (such as a bank), or it could be a quasi-public student loan agency that issues state-based student loans. For federal loans, the original lender could be the U.S. Department of Education (if you have Direct federal loans), or could be a private entity (such as a bank) is you have a FFEL federal loan, which is a federal student loan guaranteed by the federal government (as opposed to directly lent by the federal government… read below for more info on FFEL loans).


Guarantor. Up until 2010, many federal loans were issued via the FFEL program, where private commercial lenders (i.e., banks) issued federally-guaranteed loans. An act of Congress in 2010 eliminated the FFEL program, so now all federal loans are issued directly by the U.S. Department of Education’s Direct lending program. If you were in school prior to 2010, however, you may have FFEL loans. FFEL loans worked like this: a private entity lent you the money, and if you ever default on that loan, the loan is “guaranteed” (or “insured”) by a state agency or non-profit organization. The “guarantor” is that insurance agency. So, as an example: you may have been issued a FFEL federal student loan in 2009 by, let’s say, Sallie Mae. If you default on that loan, the guarantor essentially provides “insurance” to Sallie Mae, so Sallie Mae gets paid by the guarantor. You then owe the guarantor, not Sallie Mae. Guarantors are, in turn, insured by the federal government.


Confused yet? Read on.


Servicer. No, we’re not done. For FFEL loans, you may have a private lender as well as a guarantor. You may *also* have a “loan servicer.” This is a company or entity that, well, services your loan. A loan servicer manages the day-to-day operations of the loan; they send you the bills, process your payments, review deferment and forbearance requests, etc. They are the ones you are most likely to deal with on a day-to-day basis. For any type of student loan- FFEL federal, Direct federal, or private- you may have a loan servicer that is different from your lender.


Let me try to put this all together for you. For FFEL loans, you may have up to three different entities which have a role in your student loan: the commercial lender, the non-profit guarantor, and the servicer. For Direct federal loans, the federal government is the lender, and you may also have a private company that acts as a servicer, although there no guarantor. For private loans, there also is no guarantor (since private loans are not federally guaranteed), but you may or may not have the same lender and servicer, depending on how the private lender conducts its business.


If your student loan is in good standing, at worst, you’ll only have to deal with those three entities. Sometimes, though, lenders will purchase assets of another lender or other lenders entirely (this was fairly common with banks over the past couple of decades), or a lender will switch your loan to a new loan servicer. This, of course, just adds to the confusion.


Collections Agencies. If your loan is in default, the lender or guarantor (if there is one) will try to get you to pay up. If they try and fail, it is likely that they will eventually hire a collections agency to pursue you. This is true for all student loans. Think of a collections agency as a much nastier loan servicer for defaulted student loans: they work for the lender or guarantor, but instead of simply managing the day-to-day repayment process, they try to pressure you to pay off your defaulted loans. Often, these collections agencies will push the envelope of the law in their pursuit of defaulted student loan borrowers.


I don’t have a snappy conclusion for this post. Bottom line is that the student loan world is a confusing mess, but I hope this information helps untangle things a bit.


Adam S. Minsky, Esq. is a Boston attorney who founded the first law office in Massachusetts (and one of the first in the country) devoted exclusively to student loan law. To learn more, please visit This post is for informational purposes only and is not intended as legal advice.