Compare the differences between Federal loans and Private loans

Federal student loans provided by government

US Department of Education LoansThe US department of education offers

different federal student loans for college students.

Some of benefits of Federal Loans includeLower interest ratesGrace-periodsConvenient payment terms

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Types of Federal LoansDirect Stafford LoanPerkins LoanDirect PLUS loansDirect loan consolidation.

Each has a number of rules and eligibility for each student to be eligible.

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Federal Loans – Loan RatesLoan Rates:

All government sponsored loans for college provide fixed rates with a certain amount of grace periods upon graduation

Federal Perkins loanInterest rate: 5% fixedGrace Period: 9 months

The purpose of Federal Loans is to help students pay off student loans faster by providing many advantages

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Private Loans – Loan RatesLoan rates for private student loans vary and

are arranged by a lender instead of the fed government.

Private loans also have strict repayment selection and more higher service fees such as a huge origination flat fee.

If a private loan company is authorized by the university, it often offers lower rates compared to Direct private student loans from loan companies who are not accredited..

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Federal Loans – Max AmountFor the highest possible total amount you

can receive for education costs, each federal loan may have a different limitation.

Ex: The Perkins Loan limit Undergraduate students:$5,500 per yearGraduate students: $8,000 per year Entire loan amount for undergraduate: $27500Entire loan amount for graduate students:

$60000 Includes the amount for their undergraduate loans. \

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Private Loans – Max AmountMax amounts for

private student loans has no limit; it all depends on a lender's judgment.

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Loan ConsolidationFederal college loans

give you an consolidation program option with a slightly better interest rate.

However, private student loans can't be consolidated with federal loans.

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Federal Loans – Qualification ProcessMost students requesting

federal loans for college have to show a financial difficulty to be qualified.

No credit score required

If an individual has formerly committed misbehavior such as felony, one will be ineligible for government financial aid despite financial reasons.

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Federal Loans – Qualification ProcessGovernment funds are transferred to

participating universities

The universities act as loan providers and make final judgments on qualification for their students.

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Private Loan – Qualification ProcessSufficiently flexible on lending terms. Unlawful misconduct doesn't really matter

for receiving a loan. Look at credit score as a lending

measurement.

If a college student or a student's parents has a great credit rating, he/she has a higher chance to receive a great rate of interest and many other benefits.

Approval rate through private lending institutions is more than seventy five percent.

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Federal Loans - Bankruptcy OptionDifficult to file for private bankruptcy to

get rid of federal loans. The government only permits a education

loan bankruptcy under "undue hardship." the definition of “undue hardship”: very

restrained for average individuals to be qualified. Private student loan bankruptcy is not as severe as federal loans, but it is still treated differently than traditional credit card liabilities.

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Private Loan - Bankruptcy OptionPrivate student

loan bankruptcy is not as severe as federal loans, but it is still treated differently than getting rid of traditional credit card liabilities.

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