Federal vs. Private Student Loan Comparison Tool (U.S. System)
Understand the key differences to make an informed decision about your U.S. student financing options.
Step 1: Tell Us About Your Situation & Priorities
Step 2: Detailed Loan Comparison (U.S. System)
| Feature | Federal Student Loans | Private Student Loans |
|---|---|---|
| Issuer | U.S. Department of Education | Banks, credit unions, online lenders |
| Eligibility Basis | Primarily FAFSA; need-based for Subsidized. Most undergraduate loans not credit-based (except PLUS). U.S. citizen/eligible non-citizen. | Creditworthiness of student and/or cosigner, income, debt-to-income ratio, school certification. |
| Interest Rates | Fixed rates, set annually by Congress. Subsidized loans: govt. pays interest while in school (at least half-time) & during grace/deferment. Unsubsidized: interest accrues always. | Fixed or variable rates. Based on credit score, market rates, and lender. Often higher than federal. Interest typically accrues while in school. |
| Loan Limits | Annual and aggregate (lifetime) limits. Vary by year in school, dependency status, and loan type (undergrad vs. grad). May not cover full cost of attendance. | Vary by lender. Can often cover up to 100% of school-certified cost of attendance, minus other aid received. Aggregate limits also apply. |
| Fees | Origination fee (a percentage of loan amount, deducted upfront). No application fees. | May have origination fees, application fees, late fees. Varies by lender. |
| Repayment Options | Multiple options: Standard, Graduated, Extended, Income-Driven Repayment (IDR) plans (e.g., SAVE, PAYE, IBR). Options for deferment and forbearance. | Typically fewer options. Standard repayment is common. Some lenders offer limited forbearance or deferment, often less generous than federal. |
| Borrower Protections & Forgiveness | Extensive protections: Loan forgiveness programs (e.g., Public Service Loan Forgiveness, Teacher Loan Forgiveness), income-driven repayment with potential forgiveness after 20-25 years, discharge options (death, total/permanent disability). | Very limited or no loan forgiveness programs. Discharge options vary by lender, often more restrictive (e.g., death discharge may apply to student but not cosigner). |
| Cosigner Requirements | Generally not required for Direct Subsidized/Unsubsidized loans. May be needed for Grad PLUS or Parent PLUS loans if adverse credit history. | Often required for students with limited or poor credit history/income. Some lenders offer cosigner release after a period of on-time payments. |
| Credit Score Impact | Not a factor for most undergraduate Direct Loans. Required for PLUS loans. Defaulting impacts credit. | Major factor for eligibility and determining interest rates. Impacts both student and cosigner credit. |
| Interest Capitalization | For unsubsidized loans, accrued interest may capitalize (be added to principal) after periods of non-payment (e.g., deferment, grace period ends). Some IDR plans have interest subsidies. | Accrued interest often capitalizes, frequency varies by lender (e.g., quarterly, annually, when entering repayment). Can significantly increase loan balance. |
| Flexibility During Hardship | Generous deferment and forbearance options available for various situations (e.g., unemployment, economic hardship). | Less flexible. Forbearance may be offered but often for shorter periods and may have stricter criteria. |
For the most current details on U.S. Federal Student Loans, visit studentaid.gov. Private loan terms vary by lender.