Thinking about borrowing a Private loan? Consider the differences between borrowing a Federal Student Loan and a Private Loan before you apply.
| Topic | Federal Loans | Private Loans |
| Repayment | You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time. | Many private student loans require payments while you are still in school. |
| Interest Rates | The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. | Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay. |
| Subsidized Loans | Undergraduate students with financial need will likely qualify for a subsidized loan where the government pays the interest while you are in school on at least a half-time basis. | Private student loans are not subsidized. No one pays the interest on your loan but you. |
| Credit | You don’t need to get a credit check for most federal student loans (except for PLUS loans). Federal student loans can help you establish a good credit record. | Private student loans may require an established credit record. The cost of a private student loan will depend on your credit score and other factors. |
| Cosigner | You won’t need a cosigner to get a federal student loan in most cases. | You may need a cosigner. |
| Tax Deduction | Interest may be tax deductible. | Interest may not be tax deductible. |
| Payment Options | If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments. | Private student loans may not offer forbearance or deferment options. |
| Repayment Plans | There are several repayment plans, including options to tie your monthly payment to your income. | You should check with your lender to find out about your repayment options. |
| Penalty Fee | There is no prepayment penalty fee. | You need to make sure there are no prepayment penalty fees. |
| Loan Forgiveness | You may be eligible to have some portion of your loans forgiven if you work in public service. | It is unlikely that your lender will offer a loan forgiveness program. |
| Assistance | Free help is available at 1-800-4-FED-AID and on StudentAid.gov. | The Consumer Financial Protection Bureau's private student loan ombudsman (www.consumerfinance.gov) may be able to assist you if you have concerns about your private student loan. |
**Source:https://studentaid.gov/understand-aid/types/loans/federal-vs-private
Updated: November 16, 2021