What is the difference between federal loans and private loans?

Incoming college students may apply for federal student loans, private loans, or both. Federal loans are provided by the Department of Education, while private loans come from banks and other lending institutions. Federal loans are highly regulated, provide fixed interest rates, and offer many repayment options after graduation. These features make them the preferred loan for almost every student and family.

Private loans are less regulated, so they may offer very different types of interest rates and an assortment of loan fees. Private loans are also less likely to provide support after graduation if you are having trouble making your loan payments. The interest rates and terms of private loans are based on the credit history of the student, his parents, and his cosigner. With strong credit, you may be able to obtain a private loan that is competitive with federal education loans.