The answer depends on you, your financial needs and personal circumstances. There’s no competition really as federal and private student loans tend to complement each other. Both provide students and their parents viable choices for college education costs.
Federal loans are provided by the Department of Education (ED) and accredited schools while private loans are offered by banks, credit unions, and other lending companies. Let us examine how each loan program works. »And let us help you find the right lender for your student loan.»
Federal Student Loans
The federal government provides assistance to students attending college or graduate school in the form of grants, scholarships, work-study programs, and student loans. Federal student loans are popular because they have low fixed interest rates; flexible repayment plans; and useful loan forgiveness, deferment, and consolidation options.
In order to qualify for a federal student loan, students or parents must submit a Free Application for Student Aid or FAFSA. This form contains the EFC (Expected Family Contribution), which determines how much (i) the family is required to shell out for the college education, and (ii) the student needs financially. Depending on the need, federal student loans fall into two major categories:
- The William D. Ford Direct Loan Program offers direct loans for those who have a demonstrated financial need and for those who don’t but still need a loan. The ED makes these loans: Subsidized and Unsubsidized Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans.
- The Federal Perkins Loan Program is available to students, both undergraduate and graduate, who have shown exceptional financial need. This program is school-based so the lender is the school.
Federal student loans, except for PLUS loans made to parents, do not require a credit check. »Click here to find a lender.»
Private Student Loans
What happens when you have exhausted all the federal assistance you can get for your child’s or your education? Or what you require exceeds the borrowing limits of federal student loans? Private student loans fill the gap that federal assistance is unable to cover. These loans can offer competitive interest rates (fixed or variable), varied repayment plans, and refinance options.
Costs & Expenses
With rising tuition and education costs year after year, a private student loan provides that much-needed financing flexibility. It can finance up to 100% of your school’s total cost of attendance, less the other financial assistance you received so far. It may be used for books, computers, lab fees, housing costs, and other college expenses.
Private student loans are credit-based; your credit score and credit standing would matter in order to qualify for the loan. But lenders allow for co-signers so if your loan co-signer has great credit, it might increase your getting-approved chances. The co-signer may be removed from the loan note if the borrower is able to satisfy the lender’s requirements.
So, is one better than the other?
Federal student loans and private student loans each have their own merits and risks. If you want to get a federal student loan, submit your FAFSA as early as 1 October 2016. If you opt not to fill out a FAFSA, consider a private student loan. We have access to lenders that can arrange the right loan package »here»