Personal Finance Tip of the Week: Choose Federal Student Loans over Private Loans

If you apply for financial aid while in college, more than likely student loans will be a part of your financial aid package. It’s important to understand what types of loans you are offered.

Federal student loans are funded by the federal government, while private student loans are made by a lender such as a bank, credit union, state agency, or school. Federal student loans include a lot more benefits than private ones, including fixed interest rates and income driven repayment plans.

Private student loans are usually more expensive and you may need a cosigner, along with a credit check, while federal student loans don’t require a credit check and you don’t need a cosigner. You don’t have to start paying federal student loans until you are done with school, and in some cases, you may be eligible to have some portion of your loans forgiven if you work for public service.

 

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