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What are the differences between Federal and private student loans?

Whether you choose federal student loans or private student loans, you have to pay back the money you borrow, plus interest. Student loans are legal agreements, so be sure you understand what you’re signing. If something isn’t clear, ask your school counselor or lender for help.

In general, federal student loans provide more flexibility in several areas than private student loans:

Borrowers don’t need a credit check to be considered (except for the Federal PLUS Loans for parents and graduate students).

Some federal student loans offer income-driven repayment plans, where the rate of repayment is based on the borrower’s salary after college.

Federal student loans allow the borrower to change their repayment plan even after they’ve taken out the loan.

It’s important to consider federal student loans before you take out a private student loan because there are differences in interest rates, repayment options, and other features. After you’ve exhausted all scholarship and grant options, and reached the federal borrowing limit, private student loans could help bridge the financial gap.

Private student loans can help you pay for college after you’ve explored scholarships, grants, and federal student loans.

Private student loans usually offer the choice of a fixed or variable interest rate. Fixed rates stay the same, giving you predictable monthly payments. Variable rates may go up or down due to an increase or decrease to the loan’s index.

Private student loans offer different repayment plans—including options that allow you to make interest-only or fixed payments while you’re in school. These in-school payments could lower your total student loan cost.

Private student loans offer flexibility, since they can be taken out by a student (often with a cosigner), parent, or creditworthy individual (e.g. guardian or other relative).


What information will I need to apply?

• Social Security number

• School information

• Loan amount

• Proof of income (if applicable)


Do I need a cosigner? What are the benefits of having one?

A cosigner is not required; however, it may increase your chances for approval and may provide a lower interest rate.


How fast is the loan process?

You can apply and check rates within minutes. If approved, you would accept your terms and electronically sign your loan documents. Next, the lender sends your loan application to your school of choice for certification. Each school has their own process and timelines which could take several days or a few weeks. After receiving certification, the lender schedules loan funds according to the school’s timelines.


Do I need to complete the FAFSA?

Yes. Any student, regardless of income, who wants to borrow federal student loans should complete the FAFSA.

What is a credit/FICO score and how does it affect my application?

FICO® Scores, the credit scores created by Fair Isaac Corporation (FICO), are the most widely used credit scores in lending decisions. Lenders can request FICO® Scores from all three major credit reporting agencies.

The classic FICO® Scores in use today by the vast majority of lenders all fall within the 300-850 score range. This score range was introduced to establish an easy-to-understand, common frame of reference for lenders and consumers.


What expenses/things can I borrow a private student loan for?

  • Tuition and fees
  • On-campus room and board
  • Off-campus housing and utilities
  • Transportation, including gas, tolls, buses and trains
  • Books, supplies and equipment related to your major
  • Miscellaneous personal supplies, including toiletries and medication
  • Housing supplies, including linens, a microwave and dishes
  • Groceries
  • Care for dependents, as long as you let your school’s financial aid office know this allowance should be factored into your aid package
  • Fees for professional testing, licensing and certificates
  • Study abroad program costs


What does deferment mean?

A loan deferment allows you to temporarily defer making payments on the principal and interest of your loan.


What does forbearance mean?

A loan forbearance allows you to temporarily stop making payments or to temporarily reduce your monthly payment amount.


What things should I consider when borrowing money?

  • Borrow only what you need and can reasonably repay
  • Recognize that you’ll pay interest on the loan
  • Understand you can use loan money only for certain things
  • Know who your servicer is and when payments begin