Private Loans vs Federal Loans

Private educational loans may have significant disadvantages when compared with federal educational loans. We encourage you to complete the FAFSA (Free Application for Federal Student Aid) and borrow any federal loans for which you are eligible before borrowing through private loans. Homeowners may also want to consider a home equity loan.

	Federal Loans	Private Loans
Co-Signer Required	Perkins/Stafford/DL: No PLUS: Usually no	Usually Yes
Credit Check Required	Perkins/Stafford/DL: No PLUS: Yes	Yes
Deferment Options	Several options guaranteed by law	Depends on program
Grace Period	Perkins: 9 months Stafford/DL/PLUS: 6 months	Depends on program
Interest Rate	Fixed	Variable
Loan Fees	Perkins: No fees Stafford: up to 1.5% PLUS: up to 4%	Depends on program
Loan Forgiveness Options	Several options guaranteed by law for Perkins and Stafford/DL	Generally none
Penalties for Early Repayment	None	Depends on program

Points to consider when choosing a private educational loan

What is the interest rate; is it fixed or variable; is the rate capped?
What fees must be paid for this loan and when are they due?
How will I receive my loan funds?
When does repayment begin and is there a grace period?
What will my monthly payment be?
What will be the total cost if I use the full repayment period?
Are there penalties for early repayment?
Are there deferment or forbearance options?
Is the loan program well-established?