I’m interested in taking out a student loan, but I’m not sure if I should use a federal lender or a private lender to finance my loan. What are the benefits of each type of student loan? Thanks!
Federal student loans are funded by the federal government, while private student loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.
Federal student loans have lower rates and fees, you don’t need good credit and you don’t need a co-signer. You have more time to pause payments and access to income-driven repayment.
On the other hand, private loans have variable interest rates, the application process is often more flexible - doesn’t require FAFSA- and anyone who meets credit, income and any other qualifications can borrow private loans.
Public Student loans are generally easy to get as you won’t need an income, good credit, or cosigner to qualify. Whereas, Private Student loans are difficult to get as you need a decent income, good credit, and cosigner to qualify. The rate for a public student loan is same for all borrowers because they receive the same interest rate irrespective of their circumstances. Whereas, the rate for private student loan is that well qualified borrowers receive lower private student loan rates to that of less qualified borrowers. Public student loan has many ways to pause payments compared to that of private student loan