Is it better to have federal or private student loans?
If you qualify for a low interest rate and can repay your loan soon, a private student loan may be best. If you'd like to take advantage of income-driven repayment plans, extensive deferment programs and potential loan forgiveness, a federal student loan is the best option.
Federal student loans are cheaper, more available and have better repayment terms than private student loans. For example, they have three-year deferments and forbearances, while forbearances are limited to just one year on private student loans. They have income-driven repayment plans.
Key Takeaways
While federal direct loans offer several benefits, they also have some notable limitations, such as there being no subsidized loan options for graduate students. Borrowers who default on their federal direct loans have to undergo additional steps to have debt cleared when declaring bankruptcy.
The Cons of Private Student Loans
Most private student loans do not offer income-driven repayment plans. Private student loans do not qualify for teacher loan forgiveness or public service loan forgiveness. Private student loans have limited options for financial relief when a borrower experiences financial difficulty.
Benefits of federal student loans
Though any student loan—federal or private—is a legal agreement and must be paid back with interest, federal student loans generally offer more flexible options than private student loans.
- No credit history needed.
- No co-signer needed.
- Fixed interest rates.
- Lower interest rates than private loans.
- Interest accrual may begin after college.
- Forbearance and deferment options.
- A repayment grace period.
- Income-driven repayment options.
- Relatively high APR.
- Sallie Mae sets repayment term length.
- Credit check required.
- Customer service unavailable on Saturday and Sunday.
- Late payment fee.
- No loan preapproval.
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college. Here are the types of student loans. (Keep in mind that not all students are eligible for every loan.)
Are Sallie Mae loans better than federal student loans? In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not.
Freshmen can borrow up to $5,500; from your third year onward, the most you can borrow is $7,500. First, make sure you need a private student loan. We urge you to be cautious because private loans are generally more expensive than federal loans and offer little flexibility if you have trouble making payments later on.
Why are federal student loans better?
The interest rate on a federal student loan is fixed and is typically lower than private loan rates. No credit check or cosigner is required to qualify for most federal student loans. Repayment doesn't begin until after you've left college or dropped below half-time enrollment.
Which loan should I accept? Given the option, you should accept a Direct Subsidized Loan first. Then, if you still need additional financial aid to pay for college or career school, accept the Direct Unsubsidized Loan.
There is no income cut-off to qualify for federal student aid. Many factors—such as the size of your family and your year in school—are considered.
Explore your federal options first
For most student borrowers, federal Direct loans are the better option. They almost always cost less and are easier to repay.
Borrowers must repay their student loans with interest
In general, interest accrues daily on federal student loans, including while a borrower is in default, and interest rates are set each year and fixed for the life of the loan.
Private student loans can be discharged at the discretion of the lender. Check with your lender to see whether your loan can be discharged in the event of death, disability, or fraud by your school.
In general, federal loans have stronger borrower protections and lower interest rates than private student loans (regardless of what your federal loan may be called). Because of these benefits, you should focus your efforts on paying off your private loans first.
For most students and families who decide to borrow, federal student loans are the best option. Repayment on federal student loans doesn't start until after you leave school, and with fixed interest rates and payment plans, monthly payments can be manageable.
U.S. student loan debt totals $1.77 trillion, and the average undergraduate borrower owes $29,300. Here are the key student debt statistics to know for 2025.
After a referral from the CFPB, in 2014, the Department of Justice and the Federal Deposit Insurance Corporation ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 servicemembers.
What credit score do you need for Sallie Mae?
| Sallie Mae | Earnest | |
|---|---|---|
| Fixed APR | 3.49% to 15.49% with autopay | 3.47% to 16.49% with autopay |
| Variable APR | 4.79% to 14.96% with autopay | 4.99% to 16.85% with autopay |
| Min Credit Score | Mid 600s | 650 |
| Loan Amount | Min. $1,000 | Min. $1,000 |
This scholarship has been verified by the scholarship providing organization.
| Name of Bank | Interest Rate (p.a.) | Processing Fees |
|---|---|---|
| ICICI Bank | 11.50% p.a. onwards | Up to 2% + GST |
| Bank of Maharashtra | 8.10% p.a. onwards | Contact the bank |
| Axis Bank | 13.70% p.a. to 15.20% p.a. | 2.00% of the loan plus GST |
| HDFC Bank | 9.50% p.a. | Maximum up to 1% of the loan amount |
The most common types of federal student loans are Direct Loans, Parent PLUS Loans, Graduate PLUS Loans, Stafford Loans, Consolidation Loans, Perkins Loans, and Federal Family Education Loans (FFEL).
The fastest way to pay off student loans is to pay more than the minimum each month. The more you pay toward your loans, the less interest you'll owe — and the quicker the balance will disappear.
