Federal vs. Private: the Ins and Outs of Student Loans
As a college student, you’ve got a lot on your plate. Between declaring a major, keeping on top of your coursework, and making some attempt at a social life, you shouldn’t have to worry about how you’re paying for your education. That’s why it’s important to understand the difference between private and federal student loans so that you can choose the one that’s the best fit for you.

Going Federal
Once you have burned through any grants or scholarships you have been awarded (and believe me, this will happen faster than you think), it’s time to take out a Federal Loan. These are loans that must be paid back. The upside to these loans is that they usually have much lower interest rates than other lending services. Federal loans are done through the Department of Education’s Federal Direct Lending Program, and it’s easy to apply. But, as luck would have it, federal loans aren’t quite that simple. You’ve got to choose which type of federal loan you want, and which type of federal loans you qualify for.

Direct Subsidized Stafford Loans are need-based loans and are awarded to students who qualify for them based on certain criteria. Federal Regulations will assess and award these loans based on several different factors, including bank statements and annual income for both you and your parents. The major upside of these is that they don’t charge you interest until you’ve finished school.

A Direct Unsubsidized Stafford Loan is the not-so-cool brother of the Subsidized Stafford. These are essentially the same deal, but they aren’t need-based and they do charge interest; even when school is in session.

Direct PLUS loans are loans that your parent or guardian can take out to pay for your tuition. These are unsubsidized loans, but interest is still charged.

Direct Grad PLUS loans are what you’ll want to look into once you’ve reached Graduate or Professional status. These also charge interest during all times, but they are paid back by you, and not your parents.

Federal Perkins Loans charge low interest, and are geared toward low-income students who need help paying for postsecondary education.

Private Loans: The Last Resort
So you’ve gotten all you could out of the federals, and you still need help paying for tuition or living expenses. No one blames you. Getting an education can be expensive. But who do you turn to now? The answer is Private Loans. These can help pay for things that the federals didn’t cover. The unfortunate thing about Private Loans is two-fold. First off, the interest rates on these can be extremely high. They are based on your credit score and how much debt you have compared to how much money you earn per year. Often times, you’ll need someone to co-sign for you. The second thing you’ll want to consider is that the interest rates on these can change every month. So while Private Loans can help you out when you’re in a tight spot, you may end up paying for them years after you graduate. The key to using student loans to your advantage rather than your detriment is to know what your options are. Now that you have the facts, you can look at your choices and make the choice that is right for you and your education. Happy Loaning!