Federal vs. Private Student Loans
The two main categories of student loans are federal loans (from the U.S. Department of Education) and private loans (from banks, credit unions, and online lenders). They differ in how rates are set, what protections you get, and who can qualify. Both Federal Student Aid and the CFPB generally recommend using federal aid first.
Side-by-side comparison
| Federal student loans | Private student loans | |
| Who provides it | The U.S. Department of Education | Banks, credit unions, online lenders |
| How the rate is set | Fixed; set by Congress each year | Set by the lender, based on credit; fixed or variable |
| Credit check | Not required for most (PLUS loans check credit) | Required; cosigner often needed |
| Income-driven repayment | Available for eligible loans (new borrowers from July 1, 2026: RAP only — PAYE/ICR/SAVE closed) | Not available (no federal IDR) |
| Forgiveness programs (e.g. PSLF) | Potentially eligible (RAP payments count toward PSLF) | Not eligible |
| Deferment / forbearance | Broad federal options | Limited; varies by lender |
| Recommended order | Use first (after grants/scholarships) | Use to fill a remaining gap |
The bottom line
For most borrowers, federal loans come first: they offer fixed, federally-set rates and protections (income-driven repayment, deferment, and forgiveness programs) that private loans generally don't. Note (updated June 2026): the available IDR plans have changed significantly — PAYE, ICR, and SAVE are closed to new enrollees from July 1, 2026; the Repayment Assistance Plan (RAP) is the primary income-driven option for new borrowers. See the income-driven repayment page for details. Private loans can fill a gap after you've used grants, scholarships, work-study, and federal loans — but compare offers carefully and read the terms.
Sources: CFPB — Federal vs. Private Student Loans; Federal Student Aid — Federal Student Loans. Federal loan details follow U.S. Federal Student Aid (studentaid.gov); always confirm current rates and limits there.
The choice that shapes your repayment
Federal loans carry fixed congressional rates, income-driven repayment, and forgiveness programs. Private loans are credit-based with fewer built-in protections. Understanding the difference before you borrow matters — especially if you later consider refinancing.
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