Guide
Federal vs Private Loans
Federal and private student loans work differently, cost differently, and protect you differently. This section explains what separates them and when each belongs in your plan.
Federal loans come with fixed rates set by Congress, income-driven repayment options, and forgiveness programs. Private loans come from commercial lenders, carry rates based on your credit, and offer far fewer protections. You should exhaust federal options before considering private borrowing.
This section draws a clear line between two things that share a name but behave very differently. Federal loans are made by the U.S. Department of Education under terms set by law. Private loans are credit products offered by lenders in the marketplace, governed by contract rather than statute. The gap between them matters most when something goes wrong — job loss, illness, a degree that does not lead to the income you expected — because federal loans carry options that private loans typically do not.
The pages here are grouped to move you from the broad comparison down to the details you need before signing. You will find the side-by-side comparison first, then the specific protections federal loans provide, then a clear-eyed look at the limited situations where a private loan is the right tool. From there the section gets practical: how private rates are set, what a cosigner actually agrees to, how to shop without damaging your credit, and how to read the disclosure document a lender is required to give you.
A few loan types that resemble private loans — loans from your state's higher-education authority and loans offered directly by a college — sit closer to federal loans in some of their terms and are covered here rather than elsewhere. If you are a parent looking to borrow in your own name rather than your child's, this section also has a page for you. Work through the comparison pages first, then the protection pages, before you look at anything specific to private lenders.
What you need to understand first
Who sets the terms
Congress sets the interest rate and fees on federal loans each year, and those terms apply to every eligible borrower regardless of credit history. Private lenders set their own terms based on market conditions and your creditworthiness. Knowing who controls the terms tells you how predictable and negotiable a loan actually is.
Borrower protections
Federal loans come with statutory protections: income-driven repayment, deferment, forbearance, and certain discharge options are written into law. Private loans may offer some of these by contract, but the lender can change or withdraw them. A protection that exists by law is more reliable than one that exists by policy.
Credit and cosigners
Federal loans for undergraduates do not require a credit check or a cosigner. Private lenders almost always evaluate your credit score and debt-to-income ratio, and many require a cosigner if your credit history is thin. The cosigner takes on full legal responsibility for the debt, which affects their own borrowing capacity.
Fixed vs variable rates
Federal loan rates are always fixed for the life of the loan. Private lenders offer both fixed and variable rates. A variable rate may start lower but can rise over the repayment period; how high it can go and how often it adjusts are terms set in the loan contract, not by any government limit.
State and institutional loans
Some states operate loan programs through their higher-education agencies, and some colleges lend directly to students from their own funds. These sit outside the federal program but often carry terms more favorable than commercial private loans. Eligibility, rates, and availability vary by state and by school.
Where current figures are published
Federal loan interest rates are published annually by the Department of Education after Congress sets them, tied to a Treasury index, and fixed for loans disbursed in that award year. A rule change that took effect on July 1, 2026 affects borrowers whose loans were first disbursed on or after that date; earlier borrowers remain under the prior rules. Always verify current rates at studentaid.gov before borrowing.