Private Student Loans vs. Federal Student Loans
It would be great if scholarships and grants could cover all of your tuition, but many students—especially adult learners—need to get either private student loans or federal student loans. Why? Well because there’s often a gap between the amount you can get from scholarship programs and the amount you actually need to make going back to school financially feasible.
That’s where student loans can help. In fact, depending on the type of private student loan or federal student loan you get, you may be able to apply the funds toward your college textbooks or even living expenses!
Which is better—private student loans or federal student loans?
It’s best to try your luck at getting a federal student loan first. There are three types—Perkins Loans, Stafford Loans and PLUS Loans.
Perkins Loans are low fixed-rate loans awarded based on financial need, and can cover up to $5,500 in undergraduate tuition each year. If you need more aid, you can also take out Stafford Loans.
There are two types of Stafford Loans; subsidized, which are based on financial need, and unsubsidized, which are available to any student.
Both types offer a low, fixed rate and don’t have to be repaid until you graduate from college! The main difference between them is that unsubsidized loans accrue interest while you’re attending school—subsidized loans don’t.
Both Stafford programs have borrowing limits, but if you qualify, you can combine them to obtain a bigger loan package. Currently, as an independent learner (i.e. a student over 24 who can’t be claimed by anyone else on their taxes), you can take out a maximum of $57,500, with no more than $23,000 of that coming from subsidized loans.
The only other caveat? You have to be enrolled at least half time to qualify, so if you plan on taking just one class at a time, this isn’t the federal student loan program for you.
There’s one other type of loan to consider. If you’re under 24, single and have no dependents, your parents can take out a federal PLUS loan for your education—assuming you can talk them into it!
When should you look at private student loans?
Sometimes you simply can’t get what you need from federal student loan programs. If you’re still in the red after receiving your federal student loan package, a private student loan could be a big help!
Also, if you’re planning to attend a college that isn’t an accredited Title IV school, you won’t be eligible for federal programs. In that case, a private student loan can make all the difference in the world!
While private student loans can have higher interest rates than federal loans, they do allow you to finance up to 100 percent of the cost to go to college—including living expenses! That can make a private loan a very attractive option!
Whatever your situation, a combination of private student loans and federal student loans can help make your college dreams a reality. If you need help sorting through your options, ask the financial aid staff at your school for assistance!