Federal student loans, also known as Direct Loans, are funded by the government and may be awarded as part of your financial aid package if you completed the Free Application for Federal Student Aid (FAFSA®). They feature fixed interest rates and offer several repayment options. Private student loans are offered by banks or other lenders, are credit-based and have fixed or variable interest rates.
There are legitimate ways to have your loans forgiven, but there are often very specific requirements you must meet in order to qualify. Research forgiveness programs ASAP, as it may affect your repayment strategy. For example, if you’re interested in Public Service Loan Forgiveness, you’ll want to make sure you have the right type of loans from the get-go (which may mean you have to consolidate), and you’ll want to make sure to get on an income-driven repayment plan.
Repayment options range from immediate full repayment (principal and interest payments immediately after the loan is fully disbursed), interest only (interest-only payments while you are in school, and start making principal and interest payments after you leave school), full deferral while in school, flat payment while in-school, graduated repayment (payments increase over time). COA-Aid (annual limit)
This page provides a basic comparison chart that highlights the key characteristics of the major private education loans. FinAid also provides a separate list of private consolidation loans. In addition to the private student loan programs, there are several websites like Credible and other student loan comparison sites that provide tools for comparing private student loans which help identify the loans that match your criteria.
Before you take out a loan, it’s important to understand that a loan is a legal obligation that makes you responsible for repaying the amount you borrow with interest. Even though you don’t have to begin repaying your federal student loans right away, you shouldn’t wait to understand your responsibilities as a borrower. Get the scoop: Watch this video about responsible borrowing or browse the tips below it.