Private Loans and Comparison Tools
Both federal and private loans are viable options for financing your education, but it is important to know the advantages and disadvantages of each loan type. Before you begin researching private loan options and how they compare to federal loans, be sure to start with financial planning and a solid understanding of your budget and financial needs.
Keep in mind that each loan program is different, and the only way to choose the best value for your unique circumstances is to do your homework, read the fine print, and compare the specific features of each program. Specifically, you should be sure to compare:
- Loan Terms
- Interest Rates (fixed or variable)
- Origination Fees
- Conditions
Private Loan Programs vs. Federal Loan Programs
Federal Loan Programs |
Private Loan Programs |
|---|---|
| Typically offer affordable monthly payments, and have several repayment plans that offer payments based on household income. | Typically offer fewer options for repayment as compared to federal loan programs. |
| Offer flexible repayment terms that allow the borrower to change their repayment plan as their financial situation changes. | Typically offer fewer options for repayment as compared to federal loan programs. |
| May qualify for loan forgiveness programs, like Public Service Loan Forgiveness (PSLF); and offer repayment plans with loan forgiveness, like Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Based Repayment (IBR). | Offer fewer options for forgiveness as compared to federal loan programs. |
| Offer postponement of payments during residency and fellowship through grace, deferment, or forbearance options. | May or may not require repayment during medical school, residency, or fellowship. |
| May be eligible for consolidation through the Direct Consolidation Loan program. | Are not eligible for federal consolidation programs, but may offer other consolidation options. |
| Offer options that are not dependent on your credit history and credit score. | Only offer rates and terms that are based on your credit worthiness. Depending on your credit score, a co-borrower may be required. |
| Are only available to borrowers who are eligible for federal student aid. | May be available to borrowers who are not eligible for federal student aid. |
| Are subject to the interest rate for federal debt, which can sometimes be higher than the rate for private debt. | Can sometimes have lower interest rates overall, if the rate of private debt is lower than the federal debt and that rate is expected to remain lower for the length of the payment. |
When a Private Loan May Make Sense For You
- You are ineligible for federal student aid.
- The rate of private debt is lower than the federal debt, and that rate is expected to remain lower for the length of repayment.
- You are certain of significant income in the near future that will allow for an aggressive and short repayment term of variable rate loans.
Additional Resources
For more information about how private loans compare to federal loans, check out these additional resources: