The short guidance is easy: take every federal dollar you qualify for before borrowing a single private dollar. The reasons are worth understanding, because the private offer often looks better on the surface.
Rates and how they are set
Federal loan rates are set by Congress, fixed for the life of the loan, and identical for every borrower regardless of credit. Private rates depend on your credit and your cosigner's, and are frequently variable, meaning the advertised number is a starting point rather than a ceiling.
A private lender may quote you a lower rate than the federal one. That is the moment to remember what the federal rate is buying you.
What only federal loans have
- Income-driven repayment. Payments tied to what you earn, sometimes zero.
- Forgiveness programs, including Public Service Loan Forgiveness.
- Deferment and forbearance with defined rights rather than lender discretion.
- Subsidised interest on Direct Subsidised loans while you are enrolled.
- Discharge on death or permanent disability, which private lenders may not offer, potentially leaving a cosigner liable.
The cosigner question: most students cannot get private loans without one, and a cosigner is fully liable for the debt. Missed payments hit their credit too. Ask whether the loan offers cosigner release, and read the conditions, because they are usually strict.
The order to borrow in
- Grants and scholarships. Money you do not repay.
- Work-study, if offered.
- Direct Subsidised federal loans.
- Direct Unsubsidised federal loans.
- Then, and only then, compare PLUS loans against private options.
Filing the FAFSA is what unlocks the first four. Skipping it because you assume you will not qualify is the most common expensive mistake in this entire process.
The short version
- Federal first, always, and file the FAFSA to access it.
- Federal rates are fixed and credit-blind. Private rates are neither.
- Income-driven repayment and forgiveness exist only on federal loans.
- A private loan usually needs a cosigner who is fully on the hook.
Common questions
Are private student loans ever the better choice?
Occasionally, for a borrower with excellent credit who has already exhausted federal options and is comparing against a high-rate PLUS loan. Even then you are trading protections for rate.
Do I need good credit for federal student loans?
No. Direct Subsidised and Unsubsidised loans do not consider your credit at all. PLUS loans include a limited adverse credit check.
What happens to private student loans if the borrower dies?
It depends entirely on the lender. Some discharge the balance, others pursue the cosigner. Federal loans are discharged. Ask before signing.