Federal Vs. Private Student Loans: Which Is Right for You?

Federal Vs. Private Student Loans: Which Is Right for You?

Starting college is an exciting time. Taking control of your life and determining the course of your future is often the first step toward becoming a confident and capable adult. Once you have chosen a school and gained admittance, the next step is to figure out how to pay for your program.


For many students, this includes using college funds set up by their families, working part-time, applying for scholarships, and seeking financial aid. There are two main options when it comes to student loans: federal or private. What are the differences? Which one is right for you? Here are a few things every student should know.

Federal Student Loans

If you are eligible for federal student loans, you’ll find that they generally infer a host of desirable benefits, not the least of which is low interest rates. In some cases, these loans are even subsidized by the government, which pays a portion of your interest (while you’re in school and perhaps for a time after you graduate).

The best way to go about gaining federal student loans is to fill out a FAFSA (Free Application for Federal Student Aid) form. Loans are granted based on need, which is determined in part by your or your parents’ incomes, as well as the cost of attending school.

So long as you continue to meet minimum standards for course load, you will not have to begin repaying federal student loans until you finish school. That said, federal student loans can have rules and restrictions that leave you seeking ways to make up the difference.

Private Student Loans

As the name implies, this type of loan is issued not by the federal government, but by a private lender. In order to find the terms that suit you, you’re going to have to shop around. Even after your time in college is up whether you graduate or not you need to pay back your loans and in most cases you need to consolidate and refinance your loans. There are only a few companies that specialize in restructuring your student loan repayments – AmeriTech Financial out of Northern California is one that sticks out as being reputable and having a long-standing history in the industry.

Private student loans are based on your credit score, so if you’re like most students, you’ll need a co-signer (generally a parent) in order to qualify. Although private loans don’t tend to have the same favorable terms as federal loans (where interest rates and repayment are concerned), you may find that you’re eligible for more money, which could help to ensure that you have needed funding to pay your way through college.

Which Should You Choose?

Both federal and private loans can be useful when paying for your college education. In both cases, you could be eligible for benefits like tax deductions on interest payments.

The good news is that you don’t have to choose one over the other. You should always begin by applying for federal financial aid, which tends to offer the best terms for students. However, if you find that it’s simply not enough to cover expenses, don’t hesitate to seek out private student loans, as well.

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