Federal Trade Commission | consumer.ftc.gov

Student Loans
A joint publication of the Federal Trade Commission and 

the U.S. Department of Education.
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An education beyond high school is an investment in your future. It can be expensive and often requires 

you or your family to take out loans to help pay for it.

Student loans fall into two categories, federal loans and 

private loans.

● Federal loans, which are subject to oversight and 

regulation by the federal government, include:

o Direct Loans, where the U.S. Department of 

Education is the lender;

o Federal Family Education Loans (FFEL), where 

private lenders make loans backed by the federal 

government; and

o Federal Perkins Loans.

● Private loans, sometimes referenced as “alternative 

loans,” are offered by private lenders and do not 

include the benefits and protections available with 

federal loans.

Whether you’re taking out a new student loan or 

consolidating existing education loans, the Federal Trade 

Commission (FTC), the nation’s consumer protection 

agency, and the U.S. Department of Education (ED), the 

agency that oversees federal student loans, want you to 

know how to spot potentially deceptive claims or business 

practices some private companies may use to get your loan 

business.
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Private Loans

Private companies may offer you loans and other forms 

of financial assistance for your education. They often use 

direct mail marketing, telemarketing, television, radio, 

and online advertising to promote their products.

Paying for your education is a serious long-term financial 

obligation; that’s why comparing the costs of different 

ways of financing your education is so important. Private 

loans tend to have higher fees and interest rates than 

federal government loans. Private loans also do not offer 

the opportunities for cancellation or loan forgiveness that 

are available on many federal loan programs. So it makes 

good financial sense to exhaust your federal loan options 

(as well as grants and scholarships) before considering 

loans from any private companies. To learn more about 

federal government loans, visit StudentAid.gov.

How to Spot Deceptive Private Student 

Loan Practices

If you are considering a private student loan, it’s 

important to know whom you’re doing business with 

and the terms of the loan. The FTC and ED offer these 

tips to help you recognize deceptive private student loan 

practices.

● Some private lenders and their marketers use names, 

seals, logos, or other representations similar to 

those of government agencies to create the false 

or misleading impression that they are part of or 

affiliated with the federal government and its student 

loan programs. ED does not send advertisements or 
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mailers, or otherwise solicit consumers to borrow 

money. If you receive a student loan solicitation, it 

is not from ED.

● Don’t let promotions or incentives like gift cards, 

credit cards, and sweepstakes prizes divert you from 

assessing whether the key terms of the loan are 

reasonable.

● Don’t give out personal information on the phone, 

through the mail, or over the Internet unless you 

know with whom you are dealing. Private student 

lenders typically ask for your student account 

number — often your Social Security number (SSN) 

or Personal Identification Number (PIN) — saying 

they need it to help determine your eligibility. 

However, because scam artists who purport to be 

private student lenders can misuse this information, 

it is critical to provide it or other personal 

information only if you have confidence in the 

private student lender with whom you are dealing.

● Check out the track record of particular private 

student lenders with your state Attorney General 

(www.naag.org) and your local consumer 

protection agency 

(www.usa.gov/topics/

consumer.shtml).
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Special Considerations for Consolidation 

of Federal Loans

Student loan consolidation is combining several loans into 

one with a new repayment term and interest rate. This is 

generally offered in connection with federal loans. Here’s 

how to help identify potential problems related to loan 

consolidation:

● Avoid lenders and marketers who use high-pressure 

sales tactics. Some marketers pitch that “your 

interest rates may go up if you do not consolidate 

immediately!” Whether and when interest rates 

for consolidating your loans will change depends 

on what type of loans you have. Look at your loan 

documents to determine whether the interest rates 

are fixed or variable:

o If all of your education loans have fixed interest 

rates, there may be no deadline to consolidate.

o If some or all of your loans have variable interest 

rates, when you consolidate into a fixed loan 

it may affect the interest rate of your loan. ED 

publishes new variable rates for some federal 

loans each July 1st. The annual rate changes 

can raise or lower the interest rate offered on 

a consolidated loan because the consolidation 

interest rate will be the weighted average of all 

loans consolidated.

Whether or not you have a targeted timeframe, take your 

time to determine whether consolidating is right for you.
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● Some lenders impose restrictions on promised 

discounts. Some may disclose these limits only 

in the fine print. Read the fine print in your loan 

documents to find these types of conditions:

o Some lenders lower the interest rate on your 

consolidated loan, but only if you opt for 

automated payments from your checking account.

o Other lenders discount the interest rate on your 

consolidated loan, but only if your loan has at 

least a specified minimum loan balance.

o Still others agree to lower the interest rate on 

your consolidated loan, but only if you remain 

current on your payments for the life of the 

loan. You may want to consider loans with more 

immediate discounts, a shorter on-time payment 

period for interest rate discounts, or an additional 

discount for signing up for automatic payments.

● Some lenders sell consolidated loans to other 

companies. Because benefits of consolidated loans 

— like promised discounts — may not transfer, 

you may lose benefits if the lender sells your loan. 

Ask the lender whether the terms of your loan will 

change if it is sold.

● Be cautious about consolidating federal loans and 

private loans into one private loan. The result of 

consolidating all loans into one non-federal private 

loan means that you lose all the benefits and 

protections provided in the federal loan programs.
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● Consolidating a Perkins loan may not be in your 

best interest. You may lose unique deferment 

and cancellation rights available to Perkins loan 

borrowers. For more information about these rights 

visit www.myeddebt.com/borrower.

● Frequent consolidation after borrowing may impact 

timelines you need to meet to qualify for these 

benefits.

For More Information or to 

File a Complaint

To learn about federal student loans, contact:

U.S. Department of Education

Federal Student Aid Information Center

P.O. Box 84

Washington, DC 20044-0084

800-4-FED-AID (TTY: 800-730-8913)

www.StudentAid.gov

Federal Student Aid, an office of the U.S. Department of 

Education, administers the federal student financial aid 

— grants, loans, and work-study programs — available 

for education beyond high school. Federal Student Aid 

interacts with postsecondary schools, financial institutions 

and other participants in the student aid programs to 

deliver services that help students and families plan and 

pay for college.
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Notify the Federal Student Aid Ombudsman at 

1-877-557-2575 or studentaid.ed.gov/repay-loans/

disputes/prepare if you have a complaint that you cannot 

resolve with your lender.

For questions about a particular lender, contact the federal 

agency with jurisdiction over that lender:

Who Regulates My Bank?

The Office of the Comptroller of the Currency maintains 

www.Helpwithmybank.gov, a clearinghouse that 

provides people with answers to more than 250 frequentlyasked questions on topics like bank accounts, deposit 

insurance, credit cards, consumer loans, insurance, 

mortgages, identity theft, and safe deposit boxes.

You also may wish to contact:

Consumer Financial Protection Bureau

P.O. Box 4503

Iowa City, Iowa 52244

(855) 411-CFPB (2372)

www.consumerfinance.gov

What About Other Creditors?

The FTC regulates non-bank lenders, including retail, 

gasoline, finance, and mortgage companies.

Federal Trade Commission

Consumer Response Center

600 Pennsylvania Avenue, NW

Washington, DC 20580

www.ftc.gov
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Report Scams

If you believe you’ve responded to a scam, file a 

complaint with:

● the FTC

● your state Attorney General

The FTC works to prevent fraudulent, deceptive and 

unfair business practices in the marketplace and to provide 

information to help consumers spot, stop and avoid them. 

To file a complaint or get free information on consumer 

issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP 

(1-877-382-4357); TTY: 1-866-653-4261. 

Watch a video, How to File a Complaint, at 

consumer.ftc.gov/media to learn more. The FTC 

enters consumer complaints into the Consumer Sentinel 

Network, a secure online database and investigative tool 

used by hundreds of civil and criminal law enforcement 

agencies in the U.S. and abroad. 

Federal Trade Commission

consumer.ftc.gov

August 2012