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Federal vs. Private Student Loans

Last Updated

June 28, 2022

Written By

Suzanna Wojnowski

As we all know, pursuing a college degree is expensive and is likely one of the largest financial decisions you’ll make, potentially costing more than buying a home. This creates a great deal of stress among students and their families, and rightfully so! More often than not, students must borrow money to pay for their college education. In fact, more than 50% of students who go to college are taking on debt. 

Every student should be aware of their unique financial position, and whether a loan is necessary to finance their educational costs. If so, Federal and Private student loans are available. The process of applying for student loans can be daunting, especially when it’s your first time. Here’s what you need to know about student loans so you can feel confident that you’re making the best financial decision for your future.

Federal vs. Private Loans

The first thing you should know is the difference between federal and private student loans. A Federal Loan is a loan funded by the federal government. To get a federal student loan, you are required to complete the Free Application for Federal Student Aid – also known as FAFSA

There are many benefits that come with federal student loans. They have fixed interest rates, meaning your rate won’t change unexpectedly. On top of that, the repayment period for Federal loans does not begin until after you graduate or if you drop below half-time, so you don’t need to worry about paying them back while you’re in school full time! In addition, credit checks and cosigners are NOT required to qualify for federal student loans, except for Direct PLUS loans. 

There are 3 types of federal loans: Direct Subsidized, Direct Unsubsidized, and Direct PLUS.

Direct SubsidizedThe government pays the interest while you’re in school, during the 6-month grace period post-graduation, and if you temporarily defer the loan
Direct UnsubsidizedThe principal loan amount starts to accrue interest once the loan is disbursed. That interest must either be paid or added to the loan amount, which is then paid by the borrower

Direct PLUS

Loans that graduate students or parents of dependent undergraduate students can use to help pay for education expenses

A Private loan is a loan issued by a private financial institution such as a bank or credit union. Private student loans can have variable interest rates (meaning the interest rate could change at any given time) so it’s important to do research before submitting applications for private loans. These typically require a cosigner or an established credit record. 

If you plan on borrowing both federal and private student loans, make sure to fill out your FAFSA first to know how much federal aid you qualify for before taking out any private loans. You should also note that for private loans, terms and conditions are set by the lender or organization, whereas with federal loans, the terms and conditions are set by law.

Private Student Loans at Family First

Family First Credit Union, in partnership with LendKey, offers Private Student Loans and Student Consolidation Loans to its members. With the quick and easy online application, you can apply and have a loan decision in just a matter of minutes! Once approved, simply send in the necessary documentation, and they’ll send your funds directly to your school. 

Family First student loans have NO origination fees and cover multiple educational costs, such as books and computers, which can add up fast. They also have low-interest rates, and can help you start building credit while you’re in school with a low payment of just $25 a month! Undergrad students can borrow up to $120,000, while graduate students can borrow up to $160,000.

Have student loans through someone else? With Family First’s Student Consolidation Loans, you can refinance your debt to lower your monthly payments and reduce the interest rate. Pay off your loans early with no repercussions, or simply make your minimum monthly payment – the choice is yours! 

Get Your Student Loans In Just 4 Easy Steps!

  1. Complete our online loan application here!
  2. Get quick pre-approval
  3. Send in supporting documents
  4. Funds dispersed directly to school

Looking for additional student resources? Check out SimpliCollege: Your Virtual College Coach!

SimpliCollege has paired up with Family First to act as a resource for families who may need help planning and reducing the cost of a college education. SimpliCollege collects all the best resources to aid students and families preparing for college.



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