Understand the difference between federal loans vs private loans

Whether you choose federal student loans or private student loans, you have to pay back the money you borrow, plus interest—whether you graduate or not. 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.

There are three types of federal loans for college:

Direct Subsidized Loans

Direct Unsubsidized Loans

Direct PLUS Loans, of which there are two types: Grad PLUS Loans for graduate and professional students, as well as loans that can be issued to a student's parents, also known as Parent PLUS Loans.

In general, federal student loans provide additional 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.

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.

Some private student loans allow you to track your credit health for free with quarterly FICO ® Credit Scores.

Credit Scores. 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).

This chart highlights the differences between federal loans vs private loans.