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7 Advantages of Federal Student Loans vs. Private Student Loans

You have several options to finance your college education if you don’t have the funds. Two of the ways are the federal and private student loans. So what’s the difference? The federal government funds the federal student’s loans.

However, private student loans can come from several private lenders such as credit unions, banks, state agencies, etc. Also, federal and private loans have different repayment terms, interest rates, etc.

In most cases, most students prefer federal student loans because of the benefits they come with. Here’s what you need to know about the advantages federal student loans have over private loans.

7 Benefits Of Federal Student Loans Over Private Loans

1.   It’s Easy To Apply For Federal Student Loans

There are four types of federal student loans. And applying for any of these loans is generally straightforward. When you submit your FAFSA application, you also apply for federal student loans.

You don’t need to provide any credit check, a separate application, and a cosigner. The only exception is the Parent PLUS Loan. For this loan, you’re required to provide a parent credit check.

2.   You Don’t Have Repay Until You Graduate.

If you choose federal student loans, you can focus on your education without worrying about a repayment plan. You can start paying back your loans after graduating, leaving college, or changing your enrollment status to below half-time.

3.   Federal Loans Have A Fixed Interest Rate

The interest rates on federal loans are fixed, and it’s usually lower than private student loan interest rates. It can also be lower than credit card rates. Private loan interest rates are variable, and that means they can spike.

The interest rates on private student loans vary depending on your parents or your credit history. However, lower interest rates usually mean less money owed with time.

4.   You May Be Eligible For A Subsidized Loan

If you’re struggling to fund your education, you’re likely to be eligible for a federal subsidized loan. Subsidized means that the government pays the interest on your student loans while you’re still in school.

If you have to defer your payments on a subsidized loan, the federal government will cover the interest during the deferment period.

5.   Most Federal Loans Don’t Require A Credit Check.

You don’t need a credit check to apply for a federal loan, especially if you came right out of high school. Besides, you might not even have enough credit history by then.

However, for private student loans, you need to have a credit history. And even with that, you might not qualify if you don’t have a high credit score unless you have a cosigner.

Federal student loans are available to any undergraduate student with financial needs. Also, you can build a good credit score if you pay back your loans regularly and on time.

6.   You Can Qualify For Loan Forgiveness

If you have federal student loans, you have an opportunity to get some or all of your loans canceled through student loan forgiveness. However, some loan forgiveness, such as PSLF, is only possible if you work for specific government sectors, non-profits, or low-income school districts.

You get your student loans forgiven after ten years, and you can get your Perkins loans forgiven quicker.

7.   You Can Consolidate Your Federal Loans

You can consolidate your federal student loans into one payment or qualify for government programs. Consolidation uses the weighted average of your interest rates, and it’s not dependent on your credit score.

Private loans don’t give you this option, but you can refinance your loans. And while most people use these words interchangeably, consolidation and refinancing are entirely different.

Consolidation is more strategic to extend your payment but doesn’t save you money or lower your interest rates. Refinancing gets you a private student loan relief by combining private or federal loans into one private loan.

You can save money and lower your interest rate, but you get no loan forgiveness options.


It’s safe to say that federal student loans have more advantages than private student loans in most situations. Regardless, you need to borrow smart and have a plan to repay your student loans as quickly as possible.

If you don’t have to borrow, don’t. But if you have to, borrow what you only need, and don’t waste it on other things apart from your educational expenses.

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