Online Extra: Federal vs. Private Loans

At a glance, here's how federal and private student loans differ

Although some federal student options are specifically tailored to parents (PLUS loans) and extremely low-income students (Perkins loans), the go-to federal loan option for most students is the Stafford loan. Students in all income brackets are eligible, but those who are lower-income can qualify for a subsidized option in which the government pays the interest while the student is in school. Most major education lenders, such as leading education lender Sallie Mae, offer students both private and federally guaranteed loan options.

Here's a breakdown of the differences between the federally guaranteed subsidized and unsubsidized Stafford loans vs. the private student loans offered at Sallie Mae.

Federal Stafford Loan Private Loan

Available on both need and non-need basis (Subsidized and Unsubsidized Stafford Loans). A credit check is not required.

Borrower must complete the Free Application for Federal Student Aid

You must be a U.S. citizen or permanent resident, full- or half-time undergraduate or graduate student.

Based on credit criteria established by lender. Credit qualification criteria vary by whether the loan is backed by a co-signer.

Individual must be:

Enrolled at least half-time at a 4- or 5-year college or university (approved by the U.S Education Dept.).

Age of majority in your permanent state of resident (in most states it's 18).

Working on your undergraduate or graduate degree.

No income requirement. Co-signers do not have to provide proof of income

Approval rate of more than 80%


Set by federal formula

Noncredit based

Variable interest rate, reset annually, capped at 8.25%

Currently 4.7% in school, in deferment status, or in grace period; 5.3% in repayment

Set by lender


Interest rates vary based on credit history. Lowest pricing is available when both the student borrower and a co-signer are credit-approved.

Variable interest rate, reset monthly

Based on the prime rate and will change monthly if the prime changes. Starts as low as prime -0.25% and goes to prime + 6%.


3% Origination fee

1% Guarantee fee

A repayment fee (3%) may apply to some credit tiers


Loan limits set by Congress

Year 1: $2,625

Year 2: $3,500

Years 3 & 4: $5,500

Graduate $8,500

Individuals may borrow up to the cost of attendance less any other financial aid received. Borrower's school must certify the requested loan amount.

Maximum aggregate loan limit (including all student loan debt, federal and private) is $100,000 without a co-signer. There is no aggregate loan limit when the individual borrowers with a co-signer.


Borrower doesn't have to make payments while enrolled more than half-time.

Borrower has six-month grace period after leaving school and before payments begin.

Standard 10-year repayment term

Variety of repayment plans, including extended repayment of up to 25 years for those with $30,000 in student loan debt.

Federal loan consolidation is an option.

Borrower doesn't have to make payments while enrolled more than half-time.

Borrower has six-month grace period after leaving school and before payments begin.

Standard repayment term is 15 years.

Variety of repayment plans, including opportunity to extend repayment term as follows:

If the aggregate student loan balance is $20,000 to $40,000, individual can extend repayment term up to 20 years; $40,000 and higher, individual can extend repayment term up to 25 years.

Loans not eligible for federal loan consolidation. Combined billing available for convenience of making single payment.

Private Loan based on Sallie Mae's Signature Student Loan, the company's most common private education loan.

DATA: Sallie Mae

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