Student loans: the basics
In short: federal student loans, from the US Department of Education, have fixed rates set by law and flexible repayment options, but are generally only for US citizens and eligible non-citizens. Private student loans come from banks and other lenders, with terms based on credit, and often need a co-signer. Borrow only what you need, and use free money (scholarships and grants) first.
Federal vs private
| Federal loans | Private loans | |
|---|---|---|
| Lender | US Department of Education | Banks, credit unions, other lenders |
| Rate | Fixed, set by law each year | Fixed or variable, based on credit |
| Who can get them | Generally US citizens and eligible non-citizens | Depends on the lender; often needs a co-signer |
| Repayment help | Income-driven plans, deferment, forbearance | Varies; usually fewer options |
To apply for federal aid you fill in the FAFSA at StudentAid.gov. Whether you qualify depends on your citizenship or immigration status, among other things; StudentAid.gov explains the rules, and this site doesn't give immigration advice.
Interest while you study
On many loans, interest starts building as soon as the money is paid out, even while you are in school. If it isn't paid, it may be added to the balance when repayment starts, and then you pay interest on it too. Paying even the interest during school can reduce the total.
Before you borrow
- Use scholarships, grants, savings and family help first.
- Work out the total cost of the program, not just one year.
- Borrow only what you need for school costs, not lifestyle extras.
- Estimate your payment after school with the loan calculator and compare it with likely starting pay in your field (the salary converter turns yearly pay into monthly).
- For private loans, compare APR, fees, whether the rate is variable, and what happens if you can't pay.
Co-signers
A co-signer, often a parent or relative, is fully responsible for the loan if the student doesn't pay, and late payments affect their credit too. Some lenders let a co-signer be released after a number of on-time payments; ask about the conditions.
Repayment
- Know who your servicer is (the company that collects payments) and keep your contact details up to date.
- If you struggle, contact the servicer before you miss a payment and ask about options.
- Be wary of companies that charge fees to "fix" or "forgive" your federal loans: help from your servicer and StudentAid.gov is free.
Handy tools
- Loan and EMI calculator: monthly payment, total interest and a year-by-year table.
- Salary converter: hourly, weekly, monthly and yearly pay, side by side.
General information, not financial advice. Rules, fees and rates change and depend on your situation. Check with your bank, the provider or a qualified professional before you decide.
Sources
- StudentAid.gov: Federal vs private loans
- StudentAid.gov: Eligibility for non-US citizens
- CFPB: Student loans
- CFPB: Should I choose federal student loans or private student loans?
- CFPB: If I co-signed for a private student loan, can I be released?