A:

Sallie Mae is a private lender, so its direct loans are not federal loans. Basically, federal student loans consist of money provided by the U.S. government, while private student loans come from entities such as banks and other financial institutions. There are also instances in which private entities work as loan servicers for certain federal loans on behalf of the government.

Sallie Mae and Student Loans

Up until Oct. 13, 2014, Sallie Mae, while generally known as a private lender, worked as a loan servicer for two federal student loans: the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program. On that date, Sallie Mae split into two separate companies, and the portion of the company that was in charge of federal loan servicing became its own company, known as Navient. From that point forward, Sallie Mae has only provided private student loans.

Private student loans, from Sallie Mae or another institution, are typically used as additional sources for loans after students explore federal loans. The more popular federal student loans are Stafford loans, which can be either direct subsidized loans or direct unsubsidized loans. Students who are eligible for financial aid as determined on their Free Application for Federal Student Aid (FAFSA) applications are also eligible for direct subsidized loans, which have contracted terms to aid in the ease of repayment. Direct unsubsidized loans are available to all students regardless of financial need, based on various eligibility criteria. If students wind up having no luck with the federal choices, or if they require additional financial assistance, private loans are another option.

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RELATED TERMS
  1. Sallie Mae - Student Loan Marketing Association

    A publicly traded company that is the largest provider of educational ...
  2. Stafford Loan

    A type of federal, fixed-rate student loan that was available ...
  3. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students ...
  4. Student Loan Forgiveness

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  5. Direct Consolidation Loan

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  6. PLUS Loan

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