7 Myths and Facts About Federal Student Loans
If you have federal student loans, demystifying their common myths can help you in the long-run. Can you separate myth from fact?
MYTH Great Lakes owns my student loans.
FACT Lenders, like the U.S. Department of Education or banks, own your loan.
Great Lakes is a student loan servicer and originator. We're the connection between you and the lender.
- Part of what we do is:
- Monitor your school enrollment and status while you're in school.
- Accept and process your loan payments on behalf of the lender.
- Assist you as you pay back your loans.
- Keep you up-to-date with information about your student loans.
- Originate and service your federal direct consolidation loans, as requested.
MYTH Great Lakes controls my student loan interest rate and profits from the interest.
FACT Great Lakes is a student loan servicer and originator that can't control your student loan interest rate and can't profit from it.
- For federal student loans, the interest is determined by the Higher Education Act as enacted and amended by Congress. Interest paid on federal loans either goes to the U.S. Government (for Direct loans) or the individual lender (for Federal Family Education Loans). Also, in general, loan owners control any rate reductions you may get for using an electronic payment method.
- For private student loans, the interest rate is determined by — and earnings go to — individual lenders, like a bank or credit union.
MYTH I need to pay a fee to sign up for Auto Pay, or apply for loan consolidation or an income-driven repayment plan.
FACT You should never have to pay a fee for the same help that's provided for free by your student loan servicer.
- At times, it may feel like your student loans are an overwhelming burden. Remember, your servicer (like Great Lakes) is there to serve you. Stay in touch. Ask questions. Lean on them for help and expertise. At Great Lakes, we look forward to making things go as smoothly as possible with your student loans. Learn more about the free services available to you.
MYTH I don't have to pay back my student loan if I can't find a job after graduation.
FACT Yes, you're still required to pay back your loans. But, there are repayment options that can help.
There are numerous repayment options that can help if you're unemployed.
- Income-based repayment plans base your monthly payment amount on your income and family size. Your loan payments could be as low as $0 a month.
- A deferment temporarily postpones your payments, but, interest will still accrue. Who pays for the interest is dependent upon whether your loan is subsidized by the government (they pay the interest) or unsubsidized (you pay the interest).
MYTH I don't have to think about my loans until it's time to pay them back.
FACT It's in your best interest to track your loans right from the beginning.
- Tracking helps prevent any misunderstanding about the types of money you've received for your education (e.g., loans you have to pay back vs. grants you don't). Visit StudentAid.gov to identify your federal loans and your loan servicer. If you also have private student loans, you can get an annual free copy of your credit report from www.annualcreditreport.com to identify them.
- If Great Lakes is your servicer, welcome! We're here to help. Please sign up to access your account on mygreatlakes.org and follow us on Facebook and Twitter. Also, please keep your contact information updated on mygreatlakes.org so you don't miss important communications on your student loans.
MYTH Past due payments cannot affect my credit score.
FACT Yes they can.
- Past due payments (also known as delinquency) can be reported to the national consumer reporting agencies at any time, and under certain circumstances can negatively affect your credit rating.
- Don't wait to take action to fix past due payments! If Great Lakes services your loans, contact us for help in understanding your options, like applying for an income-based repayment plan that may be able to reduce your monthly payment to as low as $0.
MYTH Past due payments cannot affect my ability to obtain services or other loans and their interest rates.
FACT Yes they can.
- Past due payments can be something that companies look at before they agree to rent you housing or allow you to subscribe to a service, such as mobile phone service.
- Past due payments can also influence the ability to get the lowest rate possible for insurance, and may affect the interest rate you're offered on other loans or mortgages.