3 Advantages of Federal Student Loans Over Private Loans

Federal student loans have several advantages over private student loans. Most students will need to take out private loans in addition to the federal loans, but if you ignore the option for federal loans entirely you are missing out on some great benefits.  Here are 3 reasons the federal typically have more advantages.

Need Based Student Loans

Unlike private loans, federal student loans aren’t based on credit. Instead, they are paid out based on an individuals need. You will have to provide financial information from yourself, and possibly your family depending on your age and situation. Since different college programs have different lengths of times and costs associated, you will also need to have this information available. The earlier you fill out the paperwork, the higher on the list you are. Those who file early will typically get more money.

Set Interest Rates

Another advantage to federal student loans is that the interest rates are set by the government. This means you don’t have to worry about extremely high rates. The federal loans aren’t designed to make a profit, so they are less concerned with this and more concerned with just getting the principle paid back. Private loans may be necessary to cover the gap, but taking the federal loans when possible will save you money.

Flexible Payment Terms

Federal loans can be back over a 30 year period. Some loans will allow you to pay interest only while you are in school, and start paying on the principle after graduation. Others will allow you to defer payments entirely until after you graduate. Once you graduate, you may be able to defer the payments again if you ever need to. Refinancing can be done through government programs if you need to lower the rate or your monthly payments. If you refinance student loans, you can pay back your student loans more easily without defaulting on them.