Please add the following sentence stems into your notebook:

    According to the infographic, the key differences between federal student loans and private student loans include:________________________.
    After comparing the interest rates for private student loans presented in the article, I can see that the interest rates of these types of loans __________________________.
    From this short overview, I understand that private student loans are the last type of financial aid I should use because _________________.

Then

1. Review the infographic comparing federal and private student loans. Its attached to this assignment

2. Read this NerdWallet articleabou the best private student loans

3. Complete the sentence stemsp

image text

**Comparing Federal and Private Student Loans**

*Need a loan to help pay for college? Consider a federal loan first!*

### Federal vs. Private

1. **Repayment**
   - **Federal**: You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time.
   - **Private**: Many private student loans require payments while you are still in school.

2. **Interest Rates**
   - **Federal**: The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates.
   - **Private**: Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay.

3. **Subsidized Loans**
   - **Federal**: Undergraduate students with financial need will likely qualify for a subsidized loan where the government pays the interest while you are in school on at least a half-time basis.
   - **Private**: Private student loans are not subsidized. No one pays the interest on your loan but you.

4. **Credit**
   - **Federal**: You don’t need to get a credit check for most federal student loans (except for PLUS loans). Federal student loans can help you establish a good credit record.
   - **Private**: Private student loans may require an established credit record. The cost of a private student loan will depend on your credit score and other factors.

5. **Cosigner**
   - **Federal**: You won’t need a cosigner to get a federal student loan in most cases.
   - **Private**: You may need a cosigner.

6. **Tax Deduction**
   - **Federal**: Interest may be tax deductible.
   - **Private**: Interest may not be tax deductible.

7. **Payment Options**
   - **Federal**: If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
   - **Private**: Private student loans may not offer forbearance or deferment options.

8. **Repayment Plans**
   - **Federal**: There are several repayment plans, including options to tie your monthly payment to your income.
   - **Private**: You should check with your lender to find out about your repayment options.

9. **Penalty Fee**
   - **Federal**: There is no prepayment penalty fee.
   - **Private**: You need to make sure there are no prepayment penalty fees.

10. **Loan Forgiveness**
    - **Federal**: You may be eligible to have some portion of your loans forgiven if you work in public service.
    - **Private**: It is unlikely that your lender will offer a loan forgiveness program.

11. **Assistance**
    - **Federal**: Free help is available at 1-800-4-FED-AID and on StudentAid.gov.
    - **Private**: The Consumer Financial Protection Bureau’s private student loan ombudsman (www.consumerfinance.gov) may be able to assist you if you have concerns about your private student loan.

*Federal Student Aid - An office of the U.S. Department of Education*

*StudentAid.gov*

artical

Private student loans originate with a bank, credit union or online lender — unlike federal student loans that are handled by the federal government.

You can use both federal and private loans to pay for school, but federal loans are usually a better choice. They often come with more favorable terms — like lower interest rates, flexible repayment options and loan forgiveness.

Private student loans can still be a good option if:

    You have already completed the Free Application for Federal Student Aid, known as the FAFSA, to see if you’re eligible for federal grants and work-study programs.

    You have already borrowed the maximum in both subsidized and unsubsidized federal student loans.

    You have good credit (a credit score of 690 or above) or a co-signer who does. It’s common for many private student loan borrowers to apply with a co-signer.

    You borrow only what you can pay back.

Below, you can get personalized rates and find NerdWallet's top-ranked private student loan providers for students, parents, independent students, international students, part-time students and graduate school.

Loans for students
How do private student loans and federal student loans differ?

You apply for a federal student loan by submitting the FAFSA. Taking on a federal loan means you’re borrowing from the government. You apply for a private student loan through a bank, credit union or online lender.

Federal student loans only come with fixed interest rates — rates that are locked in for the life of the loan — that are set by Congress annually. Private lenders can offer fixed or variable rates that are based on your creditworthiness — and your co-signer's if you have one. Federal loans also charge origination fees; private loans typically do not.

Borrowers of federal student loans get extra protections — like income-driven repayment and Public Service Loan Forgiveness — that private loans lack.

» MORE: Federal vs. private student loans: Pros and cons
How do I choose a private college loan online?

Compare offers from multiple lenders including banks, credit unions, online companies and state-based lenders to find the lowest interest rate. Depending on the lender, you may be able to choose a fixed or a variable interest rate. A fixed rate stays the same throughout the life of a loan. A variable rate may start out lower than a fixed rate, but could increase or decrease over time depending on economic conditions.

Consider any borrower protections your private lender offers, including deferment and forbearance, as well as other repayment options. You may also have the option to choose your loan term, which means you could pay off your loan faster and with less interest by making higher payments or pay lower amounts with more interest over a longer period of time.

» MORE: How to get a student loan
How do I qualify for a private student loan?

Each lender will have its own requirements for taking out a loan. Credit score and income are taken into account for most student loans. Higher credit scores and incomes tend to get the best rates and are more likely to be approved for higher borrowing amounts. Since undergraduate borrowers are less likely to have established credit or income, lenders will usually prompt students to apply with a co-signer. Some lenders who have loans for borrowers without a co-signer will consider academic performance and income potential.

Lenders will often require you to attend a Title IV school, which means your school processes federal student aid. Some lenders don't offer loans in certain states.

» MORE: Should you get tuition insurance? 
Can I get a private student loan with bad credit?

You’ll have a hard time finding a private student loan from a bank, credit union or online lender if you have bad credit. Federal student loans don’t require borrowers to demonstrate creditworthiness, so they’ll be your best option if you have bad credit. If you’ve already hit your limit on federal loans, you may be able to get a private student loan if you apply with a co-signer who has solid credit — typically scores in the high 600s or better.

» MORE: Student loans for borrowers with bad or no credit
Will I need a co-signer for a private student loan?

If you have no income and no credit or bad credit, you’ll need a co-signer to get a private student loan. Without bills in your name, such as a credit card, car loan or utility, it's hard to demonstrate that you can pay bills on time. Your co-signer will need a steady income and excellent credit scores, typically in the high 600s. Signing with a co-signer means they’re on the hook for your loan if you can no longer pay it.

Some private lenders will let students apply without a co-signer. Instead of basing your loan offer on your credit, they look at your academic performance and earning potential to determine your ability to pay back the debt.

» MORE: How to get a student loan without co-signer
How do I apply for a private student loan?

Each lender will have its own application requirements. You’ll usually need to provide documents that prove citizenship, identity and income along with school information, like cost of attendance or the financial aid award letter from your college.

As part of underwriting, you or your co-signer will need to show you have a credit score in the high 600s or higher, as well as cash flow to make loan payments. They’ll also look at your or your co-signer’s debt-to-income ratio to make sure you have the funds to pay a student loan bill in addition to any other bills in your name.
How exactly do student loan interest rates work?

Learn more about how student loan interest rates are determined, including a history of rate changes through the years. Private student loan interest rates can sometimes be lower than federal rates, but approval for the lowest rates requires excellent credit. If you have good credit, you may be able to refinance existing student loans to get a lower rate.
Recent studies on paying for college
NerdWallet study: College-bound grads could exit with $37K of student debt

A 2024 high school graduate who will depend on student loans to pay for college can expect to borrow about $37,000 for their bachelor’s degree, according to a recent NerdWallet analysis. 

For more details, and to learn a number of ways to cut down on the amount borrowed for a bachelor's degree before, during and after college, see the full study here.

» MORE: 2024 student debt statistics
College Board study: More than half of college students take out student loans

Among 2021-22 bachelor's degree recipients from public and private four-year colleges, 51% graduated with student debt,  according to College Board’s latest 2023 Trends in College Pricing and Student Aid study. 

However, overall student borrowing is steadily falling. In 2022-23, borrowing decreased for the 12th year in a row, the study found. Families borrowed $98 billion in federal and private student loans, down from an inflation-adjusted peak of $153 billion in 2010-11.

If you or your child are considering going to college, familiarize yourself with all of the options available to you to fund that education — and submit the FAFSA to be considered for the most aid possible.
STUDENT LOAN RATINGS METHODOLOGY

Our survey of more than 26 banks, credit unions and online lenders offering student loans and student loan refinancing includes the top 10 lenders by market share and top 10 lenders by online search volume, as well as lenders that serve specialty or nontraditional markets.

We consider 40 features and data points for each financial institution. Depending on the category, these include the availability of biweekly payments through autopay, minimum credit score and income requirement disclosures, availability to borrowers in all states, extended grace periods and in-house customer service.

The stars represent ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star.