Federal vs. Private Student Loans

A common question from students looking to pay their tuition bill is “Should I use federal or private student loans to pay for school?” Students should always get federal student loans first, and find private student loans to fill any remaining gaps in funding. Below we list details about what makes these loans different.

Federal Student Loans - Federal loans carry fixed interest rates and usually have a lower total cost than private student loans that have variable rates. If you need to take out student loans to pay for school, start with federal loans first.

Note - Federal loans can’t be accessed without completing the FAFSA, or Free Application for Federal Student Aid.

Private Student Loans - Only after you have exhausted your federal loan options, should you consider private loans as an alternative funding source. Compare private student loans when shopping to find the best match for your needs.

How can I find these different loans?

Federal Student Loans - As of July 1, 2010, all federal student loans can be attained through your college via the Direct Lending Program.

Note - Currently, two-thirds of college students take out student loans and the average debt at graduation is $23,000. A new law was signed by the Senate in March that is meant to help US students better afford college and be prepared for the modern world without the burden of excessive debt. So how will this affect you?

Private Student Loans - Comparing private student loans is the best way to find the right student loan for you. You should compare across variables that matter, such as: APR, Total Cost, Monthly Payments, etc.