With the price of college tuition at an all-time high, many young people are stuck struggling with how to pay for it all.
Whether you’re a recent high school graduate or an undergrad with hopes of attending graduate school, student loans are a practical and widely used option for covering your tuition costs.
While millions of students borrow money to pay for tuition, housing, and other costs, there’s no guarantee they will receive the best possible interest rate out there. It takes research, patience, and a real understanding of loan options to secure loan terms that are practical for your future – and ultimately paying them off.
When it comes to student loans, borrowers typically have a couple of options: federal student loans or private student loans. Both of these carry their own unique set of benefits. Which route is best for you will depend on a variety of factors. You’ll need to weigh your options to make the best decision for your unique financial situation.
Let’s dive deeper into the issue of federal vs private student loans and how they can impact your financial future.
What are federal student loans?
Federal student loans are loans offered by the federal government – specifically the U.S. Department of Education. There are several types of federal loans available for borrowers who qualify including:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
How to repay federal student loans
Once you graduate and secure steady employment, you’ll need to begin repaying your federal student loans. The federal government employs several different repayment programs for lenders such as:
- Standard plan
- Graduated plan
- Federal consolidation
- Income-driven repayment plans
- Public Service Loan Forgiveness
Should I take out private student loans?
Private student loans are those offered by private banks and other financial institutions like credit unions.
If you decide to take out a private student loan, be sure to do your due diligence and proceed with caution. Different lenders may offer different interest rates, some of which may not be feasible to deal with financially post-graduation.
You never want to be stuck owing more than you can handle, so be sure to shop around for the lowest rates from different private lenders to ensure you get the best deal available.
How to repay private student loans
Private student loans are a valuable resource for students to fill in tuition funding gaps, but repayment can quickly become a major cause of stress if you’re not prepared.
If you find yourself in a spot where your payments are just too high for your current income, you have options like student loan refinancing. Some private lenders may even provide assistance, such as deferment or forbearance of your loan payments. This can give you the time you need to get back on track.
Although deferment or forbearance of student loans is a valuable option for some, it may only be available to you if you fit certain criteria and circumstances. Once your financial situation improves, you will need to resume payment. These are all things to keep in mind when seeking help with repaying your loans.
Other finance options, like refinancing student loans, can make a world of difference when dealing with your debt post-graduation.
By refinancing your student loans, you can get a new interest rate and repayment period, depending on your financial standing. You may secure a lower interest rate and you can consolidate your student debt so it’s more manageable.
Use Purefy’s Compare Rates tool to see your rate options in one place and determine which is the best for you.
Federal vs. private student loans for college
You have choices when it comes to federal vs. private student loans to pay your tuition. Whether federal or private student loans are the best option for you will depend on several factors.
While both federal and private loans both help you pay for college, there are vast differences between the two. Federal student loans are subject to terms and conditions bound by government policy, which can include income-driven repayment plans. These can present big benefits for borrowers. Federal student loans also don’t take into account things like credit score, so if you are carrying a low credit score, federal student loans may be the more affordable option.
Private loans, on the other hand, are made by private entities like banks, credit unions, and other organizations. Terms here are set by the lender and will vary depending on who you take the loan out with. Private lenders will also use your credit score to determine eligibility and loan offers, which may put you in a bad position if your credit score is poor.
Whether you choose federal or private student loans to provide the financial assistance you need for higher education, you will generally need to begin repaying your loans six months after graduation. This can deal a financial blow if you are already struggling to make ends meet. If you find yourself in this position, you can explore other paths, like student loan refinancing. This can help you save money on interest and even extend your repayment terms to relieve some of your financial burden.
Securing the best student loan rate
Research is key to securing the type of student loan offer you want. If you need help determining which route to take, try our compare rates tool. This valuable resource allows you to compare rates from different lenders, which ensures you cover all the bases in regard to your loan options. Once you make a decision, you can then begin the process of applying for your preferred loan. It’s that easy.
Are you hoping to learn more about your student loan options? Our blog is filled with resources about federal and private student loans to help you embark on your financial journey with all of the knowledge you need at hand.