You Need Private Student Loans Like You Need a Hole in the Head

If you need to borrow for college, go for federal student aid.


Need money for college? Go for federal student aid. If you have to borrow money for college, federal student loans are your best bet.

What's good about federal student loans? Fixed interest rates and flexible repayment plans are just a few things. Federal loans have discharge, deferment, forbearance, and forgiveness options that provide an important safety net for borrowers and their families. Additionally, federal loans typically carry lower fixed interest rates.

[Read about how federal loans are getting cheaper and easier.]

What's good about private student loans? Nothing. Private student loans are more expensive and less safe than federal student loans. The government does not regulate private loans the same way they do federal loans, and private loans often have risky variable interest rates, making them an expensive alternative to federal loans. Because private loan rates are usually based on credit history (of either the borrower or a cosigner), students with low incomes tend to pay even more.

[See frequently asked questions about private student loans.]

The smart move is to take full advantage of scholarships, grants, work study, and all federal student loans (such as Stafford, PLUS, and GradPLUS loans) before ever considering private student loans. If you've exhausted all your federal student aid options and still don't have enough to pay for college, check the school's estimated cost of attendance and consider whether you'd be better off at a less expensive school. If you are going to borrow private student loans, ask a lot of questions, know your options, and understand what you're getting into.

Here are some other online resources about private student loans:

Understanding private student loans from Student Loan Borrower Assistance

Questions to ask about private student loans from The Project on Student Debt

Private student loan guide (PDF) from Student Loan Analytics

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