5 commonly mixed up student loan terms

One of the challenges of being a loan representative is trying to work through terminology.  Though you know the correct thing to label things people all the time are saying one thing when they mean another.  Here is 5 things that are typically mixed up.

1. Subsidized vs Unsubsidized-Subsidized loans are loans that the government pays the interest during certain time (such as deferments, while in school at least half time and sometimes during grace) while unsubsidized loans are ones where the borrower is responsible for all the interest.

2. FFELP vs Direct-The Federal Family Education loans are loans that were originated by banks and backed by the Federal government.  They ceased on June 30, 2010.  Direct Loans are loans that are originated directly from the federal government.  You can tell the difference because Direct Loans loan type code starts with DL.  For example a stafford FFELP loan would be STFFRD where as a Direct Loan would be DLSTFD.

3. Private vs Federally Backed-Private loans are loans given by private companies (such as Campus Door) that have the safety nets of government loans such as deferments, forbearances, or loan forgiveness.  Federally backed loans are FFELP or Direct Loans that are backed by the government and have all the corresponding safety nets.

4. Forbearance vs Deferment-both these temporarily suspend your payments.  However with a Forbearance interest accrues on all loans and is the responsibility of the borrower while for a Deferment the government pays the interest that accrues on subsidized loans.  Deferments typically need more certified proof (such as paystubs or proof of benefits) then most forbearances need (with some exceptions).

5. Delinquency vs Default-Delinquency is when loans have not been paid by the its due date.  Where as Default is where a loan is at least 270 days delinquent.  A delinquent loan is subject to negativebcredit reporting, phone calls, letters, and emails but until a loan defaults are you subjects to thinks like garnishments.