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Federal Loans Vs. Private Loans

Federal student loans include many benefits (such as fixed interest rates and income-based repayment plans) not typically offered with private loans. In contrast, private loans are generally more expensive than federal student loans.

The list below provides a summary of the differences.

Federal Student Loans

  • You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time.
  • The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. View the current interest rates on federal student loans.
  • Undergraduate students with financial need will likely qualify for a subsidized loan where the government pays the interest while you are in school on at least a half-time basis.
  • You don’t need to get a credit check for most federal student loans (except for PLUS loans). Federal student loans can help you establish a good credit record.
  • You won’t need a cosigner to get a federal student loan in most cases.
  • Interest may be tax deductible.
  • Loans can be consolidated into a Direct Consolidation Loan.
  • If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
  • There are several repayment plans, including an option to tie your monthly payment to your income.
  • There is no prepayment penalty fee.
  • You may be eligible to have some portion of your loans forgiven if you work in public service.
  • Free help is available at 1-800-4-FED-AID and on

Private Student Loans

  • Many private student loans require payments while you are still in school
  • Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay.
  • Private student loans are not subsidized. No one pays the interest on your loan but you.
  • Private student loans may require an established credit record. The cost of a private student loan will depend on your credit score and other factors.
  • You may need a cosigner.
  • Interest may not be tax deductible.
  • Private student loans cannot be consolidated into a Direct Consolidation Loan.
  • Private student loans may not offer forbearance ordeferment options.
  • You should check with your lender to find out about your repayment options.
  • You need to make sure there are no prepayment penalty fees.
  • It is unlikely that your lender will offer a loan forgiveness program.
  • The Consumer Financial Protection Bureau's private student loan ombudsman may be able to assist you if you have concerns about your private student loan.

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American Consumer Credit Counseling (ACCC) is a leading source for personalized debt management advice and programs to consolidate your debt. If you are interested in consolidating debts, contact one of ACCC's credit advisors to learn how to consolidate bills without having to take a consolidation loan as would be suggested by some other debt relief agencies. As a Better Business Bureau accredited credit counseling agency, you can count on ACCC for fair and honest help with credit issues. We are also approved by the Department of Justice to provide pre-bankruptcy counseling and post-bankruptcy credit counseling courses.

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