I am about to graduate and have federal and Sallie Mae student loans. I do not plan on defaulting on these loans, but, in a worse case scenario, which would have priority? I have been reading on this forum that if you default on a federal loan you could be ineligible for types of federal public aide. What if you default on a Sallie Mae loan but your federal loan is current? And if you consolidate your federal loans with Sallie Mae and default on them, does that count as defaulting on a federal loan? I don't want to find myself in this situation, but with a large amount of student loan debt, I want to at least know the facts.

Thanks,

Andrew

My understanding is that it does not matter who issued the loans or who holds the loans but who guarantees the loans. My recollection is that Sallie Mae's loans are government guaranteed and hence they would be treated just like DSL loans. Private loans, on the other hand, are not guaranteed by the government although I believe that the 2005 BK law made them much harder to discharge in a 7.

I am not up on all recent details of student loans but that is what I recall.

This brings up another question, I had considered doing 2 years in the Peace Corps. Not only do I share the same motivations, but they also offer a 15% loan forgiveness offer per year, up to 70%. Would this include my Sallie Mae loans as well as my Stafford/Perkins loans?

I am pretty sure that Peace Corp cancellation only covers federal loans. You private loans thru Sallie Mae would not qualify. Also, there would be no deferment available for your private loans while participating in the program.

Call and ask them. I am sure they get this type of question all the time.

I once applied to the PC but got cold feet near the end of the process. They wanted to send me to China and I wanted to go to Africa. Immature mistake.

From the PC website....

Cancellation of Student Loans

Only Volunteers with Perkins loans are eligible for a partial cancellation benefit. Fifteen percent of your Perkins loans can be cancelled upon the completion of each 365 days of service during your first two years of service, and 20 percent can be cancelled upon completion of each of the third and fourth years. Therefore, four full years of service would equal a 70 percent cancellation of your existing loan.