The Difference Between Private Student Loan and Federal Student Loan
Private student loan and federal student loan are the two types of college loan that are commonly known and availed. When student loans were first introduced in the society, only the federal government offered student loans. But the hassles of paperwork and bureaucracy in working with the federal government prompted the increase of private student loans offered by private corporations.
A private student loan is a more viable option since a federal student loan may not cover all the necessary expenses for your education. Private student loans are also known as alternative loans and are not backed up with any government institution. Student loans from private corporations are also independent from the financial status of your academic institution.
The student loans from the private corporations can also be availed by a parent or by a student. The interest rates, payment and repayment arrangements also depend on the lender's preference. But, a federal student loan, unlike the student loans from private corporations, offer several repayment options, including deferments, forbearance and income-sensitive repayment. These options are not available in private student loans.
If you are not familiar with the process of availing of student loans, getting federal student loans would be more advisable. Since these loans are supported by the government, you can quickly get information regarding these loans from schools, banks or student loan lenders. The Federal Family Education Loan Program is also one avenue you can check.
Compared to those offered by private corporations, the repayment periods in federal student loans are longer. The interest rates are also lower. The credit requirements needed are also easier.
Potential approval is higher in applying for a federal Stafford loan. But, preliminary approval is faster with private college loans, taking just 15 minutes. Both types also offer competitive rates.
Applying for federal college loans is highly recommended prior to applying for other financial aids. You can take advantage of private college loans to cover whatever is not covered by the federal college loans and other types of financial assistance.