Bank Loan

Types of Student Loans:

Federal student loans are funded by the government. They tend to offer more benefits, such as fixed interest rates, income-driven repayment plans, and the possibility of loan forgiveness.

Private student loans are offered by banks, credit unions, and other lenders. These loans may have variable interest rates and fewer protections for borrowers compared to federal loans.

Eligibility

To qualify for federal loans, students need to demonstrate financial need through the Free Application for Federal Student Aid (FAFSA).

Private loans may require a credit check and other eligibility criteria like a certain credit score or income level.

Loan Limits

Federal loans have borrowing limits based on the student’s year in school and whether they are dependent or independent.

Private loans limits are determined by the lender, typically based on the cost of education and the borrower’s creditworthiness.

Interest Rates

Federal loans have fixed interest rates set by the government each year.

Private loans can have either fixed or variable interest rates, which depend on the lender and the borrower’s credit profile.

Repayment Options

Federal loans offer several repayment plans, including standard, extended, graduated, and income-driven plans.

Private loans typically offer fewer repayment options, and terms vary by lender.

Deferment and Forbearance

Both federal and private loans may allow for deferment or forbearance, which let borrowers pause or reduce their loan payments temporarily under certain conditions like being enrolled in school or facing financial hardship.

Loan Fees

Some private loans may charge origination fees or other costs. It’s important to compare these fees and loan terms carefully before borrowing.