Direct, Indirect, and FFEL Student Loans: What's the Difference?

If you have a student loan that was provided by or guaranteed by the federal government, your loan likely falls into one of two categories: direct loans or indirect loans. Indirect loans are also called Federal Family Education Loans (FFELs). Things can get confusing, however, because many types of loans—such as Stafford or PLUS loans—can be either a direct loan or an indirect loan.

Read on to find out the difference between a direct loan and an indirect loan/FFEL loan.

Direct vs. Indirect Federal Loans

Federal student loans are either direct loans or indirect loans. These are separate from private student loans, which have nothing to do with the government, and are provided by private lenders, much like any other kind of loan you might obtain for a house or a car or for retail purchases. (Learn more about private student loans.)

Direct Loans

Direct loans are loans provided to you directly by the U.S. Department of Education.

Indirect Loans/FFELs

Indirect loans are loans that were provided by private institutions, but guaranteed by the federal government. These loans are often called Federal Family Education Loans, or FFELs. The government does not directly insure FFELs, but rather acts through a guarantor. If you default on your loan, the guarantor will pay the lender for your loan. The government in turn reimburses the guarantor. If you have an indirect/FFEL, you will almost always deal directly with the lender, guarantor, servicer or collection agency—not the federal government. (Learn more in What Is a Federally Guaranteed Student Loan?)

In 2010, the government eliminated the guarantors and other middlemen by passing legislation ending the FFEL program. After June 30, 2010, borrowers can only get direct loans.

Direct and Indirect Loan Types

There are many different loan types, many of which can be either a direct loan or an indirect loan. If you took out your loan after June 30, 2010, however, your loan will be a direct loan.

Stafford Loans

This is the most common type of student loan. Stafford loans can be subsidized or unsubsidized. Subsidized loans are need-based, whereas unsubsidized Stafford loans are not.

Subsidized loans do not accrue interest during times you are deferring payment, for example, while you are still in school. Unsubsidized loans will accrue interest during deferment. The difference between what you'll pay for a subsidized and an unsubsidized loan can be significant if the loan is deferred during a multi-year college program.

PLUS Loans

PLUS loans are the only kinds of federal loans that require a credit check. Often, parents will obtain a Parent PLUS loan on behalf of their child. Parents will be responsible for repayment and will be the target of collection if they default.

Perkins Loans

Perkins Loans, a different kind of loan, are need based loans. Perkins loans were given out by schools, with money provided by the Department of Education. Certain default rules and repayment options are slightly different with Perkins loans.

Under federal law, the authority for schools to make new Perkins Loans ended on September 30, 2017, with final disbursements permitted through June 30, 2018. As a result, students can no longer receive Perkins Loans.

Consolidation Loans

A consolidation loan is a separate loan that pays off a borrower’s existing loans into one larger loan after repayment on the loans has begun. (Learn more about student consolidation loans.)

Looking Up Your Loan

You can find information on your federal student loans at the National Student Loan Data System. Private Loans are not in this database, however.