Choosing the Right Student Loans: Federal vs. Private

In no uncertain terms, our advice is: always get federal student loans first and find private student loans to fill any remaining gaps if federal alternatives are not enough to cover the cost of your education.

Federal Student Loans


To apply for federal aid, you must complete the FAFSA, or Free Application for Federal Student Aid at

Private Student Loans

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Choosing the right student loan can be challenging. But it doesn’t have to be impossible. Here’s the process:

Start by filling out the FAFSA, or the Free Application for Federal Student Aid

Without it, you won’t have access to federal student loans, many of which are not based on need. Don’t ever assume you won’t qualify for federal aid.

Private Student Loans

Comparing private student loans is the best way to find the right student loan for you. You should compare across variables that matter, such as: APR, Total Cost, Monthly Payments, etc. SimpleTuition’s student loan comparison tool can help. The best part? It’s free.

Dig deep for alternatives to private loans

It will save you money in the long run to use private loans as the last source of funding. Remember to take into account your savings, any bonds that may be collecting dust in a safe somewhere, local and national scholarships, government loans, part-time work, or work-study as ways to cover the cost of college.

Know your loan options

It’s important to investigate many different private loans before you apply in order to make sure you are getting the ideal arrangement for your needs. We appreciate that this can be a time consuming process, so we have included information on dozens of different lenders on We can even compare your options for you, saving you time and money. And, as always, it’s free.

Look beyond the annual percentage rate (APR)

It is important, of course, but there are many other factors to consider, such as the total cost of the loan, deferment options, and monthly payment. All of these criteria are available in the listings at SimpleTuition, making it even easier to compare.

Confirm the interest rate for which you qualify

It’s important to confirm interest rates with the lender you are researching. The actual interest rate and fee on your loan will be determined by the credit profile of the borrower and cosigner. Make sure to consider the rate offered to you before you commit.

Find a credit-worthy cosigner

Most college students will need a cosigner. Increasingly, this goes for graduate students, too, since you may not have enough of a credit history to qualify for a loan on your own. An important thing to note: the better your cosigner’s credit, the cheaper your loan.

Ask if the lender uses a “servicer”

A servicer is a separate company that handles the details of processing and collecting loan payments, customer service questions from borrowers, originating the loan, and more. Borrowers are often confused when they think they are taking out a loan from Company X, but then get paperwork from Company Y. Borrowers should communicate with the servicer and not the lender with questions, address changes or any changes to the student’s status.

Find out if the lender will capitalize the interest on the student loan

Some lenders will take the interest that is accrued when a student is in school and not making payments and add it to the principal, or the original borrowed amount. This usually only applies to unsubsidized federal student loans and private student loans.

Capitalization increases the amount owed and the amount of each monthly payment

Capitalization increases the amount owed and the amount of each monthly payment. Some lenders capitalize the interest every three or six months, or once a year. The least expensive option is to find a lender who will capitalize the interest only once.

Learn about repayment assistance options

Look for a lender that will help manage your money with a variety of options for payment plans and repayment assistance. Graduated repayment is one option that means your monthly payments start out lower and increase as you earn more money. Forbearance is a deferment of your loan payments if you cannot make them, due to extenuating circumstances. The point here: know what your options are.

Choose a lender with good customer service

Remember that you are the customer. In most cases, you have plenty of options from which to choose for a lender and student loans are a big commitment. Make sure to find a lender who you can reach with a toll-free telephone number or fast online assistance available 24/7.

An Important Reminder: Always exhaust your federal student loan options first, before you pursue private student loans. But if you do need a private student loan, we highly recommends that you secure a credit-worthy co-signer. It can save you literally thousands of dollars.

Need a private student loan? Compare your student loan options all in one place. SimpleTuition

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