Student Loans - Federal vs Private: What's the Difference?
Navigating student loan options can be overwhelming, especially when you're trying to figure out how to balance educational expenses with your existing obligations. What are the key differences between federal loans and private loans? Here is an easy-to-reference guide.
Federal student loans are funded by the U.S.government and offer several benefits that make them a popular choice for many students.
- Fixed Interest Rates: Federal loans come with fixed interest rates, which means your rate won't change over the life of the loan. This provides stability and predictability in your monthly payments.
- Income-Driven Repayment Plans: These plans adjust your monthly payment based on your income and family size, making it easier to manage your debt after graduation.
- Deferment and Forbearance Options: If you encounter financial hardship, federal loans offer options to temporarily pause or reduce your payments.
- Loan Forgiveness Programs: Certain federal loans may be eligible for forgiveness programs, such as Public Service Loan Forgiveness (PSLF), which can forgive the remaining balance after a set number of qualifying payments.
Private student loans are offered by banks, credit unions, and other private lenders. While they can be a useful supplement to federal loans, they come with different terms and conditions:
- Variable or Fixed Interest Rates: Private loans can have either variable or fixed interest rates. Variable rates can change over time, potentially increasing your monthly payments.
- Credit-Based Approval: Your eligibility and interest rate for a private loan depend on your credit score and financial history. You may need a co-signer if you have a limited credit history.
- Less Flexible Repayment Options: Private loans typically don't offer income-driven repayment plans or loan forgiveness programs. However, some lenders may offer deferment or forbearance options.
- Higher Borrowing Limits: Private loans can sometimes offer higher borrowing limits than federal loans, which can be helpful if you need to cover additional expenses.
Need more information about student loans? We can help you get the student loan you need regardless of where you are in your education journey. Click here to learn more about student loans from Fortera in partnership with Sallie Mae®.
This article was provided in partnership with GreenPath