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What's the difference between a federal and a private loan?


A Federal Loan is a loan offered to students or future students by the federal government. The US Department of Education funds federal loans.

A private loan comes from a private company. Banks and private unions usually loan the money to students or their parents.

Who's eligible for a federal and private loan?


Federal and private loans have diverse eligibility criteria. Nevertheless, here are the most common criteria to meet.

Federal student loans criteria:

  • Students who need financial aid or have the same parents can apply for multiple federal student loans.

  • However, federal loans are exclusively for education. The economic need is crucial for acquiring a federal loan.

Comparing a private student loan with a federal loan is easy.

While the federal loan helps people struggling economically, the private loaner will check the income, credit history, and credit score of the person who requires the money.


Another difference is that you can use your private loan for anything. There's no issue if you use the money to buy clothes, food, or electronics.

Some federal student loans offer income-driven repayment plans, where the repayment rate 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.

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 in the loan's index. They offer different repayment plans—including options that allow you to make interest-only or fixed payments while in school. These in-school payments could lower your total student loan cost.


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. Always consult with a financial advisor.The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

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