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Private Student Loans vs. Federal: Which Is Better in the Long Run?

Man in a suit pointing at words "Student Loans"

Getting ready to head off to college or grad school? That’s an incredibly exhilarating time for most students, no matter the age. It’s exciting to have been accepted into a new school, and the future looms ahead holding many years that one hopes will include a fulfilling career. While finances should be one of the most important considerations, often we are so focused on the here and now and just getting into school and getting started that we may not give as much time to the options in front of us; for instance, what about taking out a private loan as opposed to a federal student loan? What’s the difference and why should we care?

At the time you are taking out a student loan, the last thing you are probably considering is a default or having to go through bankruptcy and finding that your loan is pretty much non-dischargeable in that process—as the laws stand today. Hopefully what you will see as you are getting ready to sign on the dotted line before beginning school is that the main differences between these two types of student loans are in costs such as interest, fees, and more.

The private student loan is generally not only more expensive, it is harder to make changes to later should you run into financial challenges. Keep in mind that this is a traditional type of loan, and to obtain it, you will most likely go to a bank or credit union, or a school—and most likely the one you are planning to attend. Listen closely to what they are promising you, and be very sure to check their track record. Are recent graduates finding jobs? Are those already out in the workforce satisfied with their careers and the results of their education? Make sure you are going to give your time, effort, years, and many thousands of dollars to the learning institution that will offer an education that can pay off in the long run. While that can be very difficult to know for sure, it’s crucial to do your homework before you sign that student loan note and head off to school.

You will probably need good credit to receive a private student loan, and payments could be required even while you are still in school. This could all point to requiring a co-signer. You may also be looking at paying higher rates of interest. Most importantly though, in looking at your safety net for the future, private student loans should be examined closely because if you do fall under financial duress later, they can be much harder to deal with when you need to defer payments, reorganize your payments, or ask for flexibility.

Federal student loans, on the other hand, offer many a benefit to the student. Again, these too are most likely going to be presented to you, or are available, through your school. Since they are offered through the government and are available to a wider range of students, most presumed just to be starting out, they can be significantly less expensive. According to the Federal Student Aid Office, there are many benefits to avoiding a private student loan. With a federal loan, you most likely will not begin making monthly payments until you are out of school. That’s certainly a major plus, along with better interest rates, the chances for a subsidized loan, and most likely no need for a co-signer.

Here’s where the benefits come in later, as well, when you are out in the world and may need some help. With federal loans, there is going to be a better chance for getting help if you need to delay payments, want to attempt to have your monthly loan sum lowered, or are considering consolidating your loan with other debts.

Man in a suit pointing at words "Student Loans"

If student loan debt is currently a challenge, contact Fitzgerald & Campbell, APLC, a law firm with decades of experience in helping clients to explore their financial options. Let us review your case and help you decide the best route. We are here to help you.

Call us today for a free consultation at (844) 431-3851, or email us at

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