Federal vs. Private Loans: Always Start with Federal
Federal vs. private student loan comparison
| Feature | Federal Loans | Private Loans |
|---|---|---|
| Interest rate | Fixed, set by Congress | Fixed or variable, by creditworthiness |
| Income-driven repayment | Yes — SAVE, IBR, PAYE, ICR | No |
| PSLF eligibility | Yes | No |
| Deferment/forbearance | Generous options | Limited to lender’s policy |
| Forgiveness options | Multiple programs | None |
| Co-signer required | No (undergrad) | Usually yes for students |
| Maximum amount (2025) | $27,000 (4yr dependent undergrad) | Up to full cost of attendance |
Types of Federal Loans and Who Gets What
- Direct Subsidized Loans: Interest doesn’t accrue during school (subsidized = government pays it). Available only to undergrad students with demonstrated financial need. 2025 rate: 6.53%.
- Direct Unsubsidized Loans: Interest accrues from day one — even during school. Available regardless of financial need for undergrad and graduate students. Same 6.53% rate for undergrad.
- Direct PLUS Loans (Graduate): Available to grad/professional students up to cost of attendance. 2025 rate: 9.08%. Higher rate; consider private loans competitively.
- Parent PLUS Loans: Borrowed by parents for dependent students. 9.08% rate. No forgiveness for parents (unless directly employed by qualifying employer).
The Minimum Borrowing Strategy
- Accept all scholarships and grants first (free money, no repayment)
- Accept work-study if offered (earn income, avoid more debt)
- Accept subsidized loans up to offered amount (cheapest federal option)
- Accept unsubsidized loans only for remaining gap
- Evaluate private loans only after exhausting federal options
- Compare total debt to expected first-year salary before accepting any private loans
💡Make Interest Payments During School
On unsubsidized loans, making even $25–$50/month interest payments during school prevents capitalization and keeps your balance from growing during your 4 years. On a $20,000 unsubsidized loan at 6.53%: $109/month in interest accrues. Paying $109/month during school means graduating with exactly $20,000 owed instead of $24,400+.
Calculate Your Student Loan Repayment Plan
Enter the loans you’re considering borrowing — see what monthly payment to expect and what each year of borrowing adds.