What’s the difference between private and federal student loans?

Private student loans and federal student loans are both great options available to make further education more accessible and affordable. Understanding how private and federal student loans work, their differences and benefits can help you decide which option is best for you.

To make sure you are getting the most out of the student loan option you chose, keep track your student loan through our online tool. 

What is a private student loan?

Private student loans are educational loans backed by private lenders, such as banks and credit unions. These loans are used to cover college or trade  school and expenses associated with them.

Lenders review your credit score, income and employment status to see if you qualify for private student loans. If you don’t meet the requirements for private student loans by yourself, you can get a cosigner with strong credit to help you qualify. Some private loans may require repayment while still in school, while others could defer your payments till after graduation.

Private student loans are typically used after federal options are exhausted.

What is a federal student loan?

Federal student loans are loans backed by the U.S. Department of Education. These loans help  students cover the cost of tuition and expenses associated with higher education at eligible universities, colleges and trade schools.

With federal student loans, your loan principal and interest will have to be repaid after you graduate, leave school or adjust your course load to a half-time student . Unlike private student loans, federal student loans do not require a credit check, making this option  more accessible to students.

Some federal student loans may qualify for loan forgiveness programs.

What’s the difference between private and federal student loans?

There are many differences between private and federal student loans. Understanding these differences can help you determine which student loan is best for you.

Remember that if you are planning to refinance from a federal student loan to a private student loan, you may lose any federal benefits.

Federal vs Private student loans: which is right for me?

The right student loan for you will depend on your needs. After you have looked at the differences between federal student loans and private student loans you should have an idea of which one fits your situation   better.

If you are hoping to get a lower interest rate or loan forgiveness after graduation, federal student loans might be the best option for you. If you do not qualify for or need more funds than are offered through federal student loans, you might want to consider applying for private student loans.

How can I apply for a private student loan?

If federal student loans are not the right option for you, you may be wondering how you can apply for a private student loan. Applying for a private student loan is an easy process.  However, there  are just a few things you will want to do before you start your application.

To apply for a private student loan, you will need to be at least 18 years old and attending an accredited college, university or trade school. Before you apply, you will want to check your credit score, income and lender’s required minimum. If you do not meet a lender’s qualifications, you will have to consider getting a cosigner who can help you meet a lender’s requirements.

After this, your final step will be to start a private student loan application.  For any questions you may have about your private student loan application and what you need, speak to an expert today.