When it comes to paying for college, student loans might be the answer - but not all loans are created equal. The big question is: should you choose federal or private student loans?
Each has its pros and cons, and understanding the differences can save you money and stress down the road.
Don’t worry, As a borrower with federal and private student loans, I'm happy to break it all down so you can decide what works best for you!
here's a quick look at what we'll cover
what is a federal student loan? 
Federal student loans are funded by the U.S. government and are usually the first stop for most students. Why? They come with benefits designed to make borrowing and repayment more manageable.
benefits of federal student loans:
risks of federal student loans:
types of federal loans
how to apply for federal loans:
what is a private student loan?
Private loans are offered by banks, credit unions (like Skyla!), and online lenders. They can help fill the gap if federal loans don’t cover all your costs, but they come with fewer perks than federal student loans.
benefits of private student loans:
risks of private student loans:
how to apply for private loans:
how do federal and private loan interest rates differ?
When it comes to interest rates on student loans - here’s what you need to know:
Federal STUDENT loans:
Federal loans have fixed interest rates, meaning the rate is set when you take out the loan and doesn’t change for the life of the loan. Rates are determined annually by Congress and are the same for all borrowers in a specific category (e.g., undergraduates, graduate students).
EXAMPLE: If you take out a Direct Subsidized Loan with a 5% fixed interest rate, you’ll pay that same 5% every year, even if market rates rise or fall. |
This is great because fixed rates provide stability, so you’ll know exactly how much interest you’re accruing and what your payments will be.
private student loans
Private loans can have either fixed or variable interest rates.
- Fixed rates: Like federal loans, these stay the same throughout the life of the loan, providing predictable monthly payments.
- Variable rates: These start lower than fixed rates but fluctuate based on market conditions, meaning your rate—and monthly payment—can increase or decrease over time.
EXAMPLE: If you borrow a private loan with a 4% variable rate, it might rise to 6% (or higher) in a few years, depending on market trends, making your loan more expensive. |
This can be risky because, although variable rates might save you money at first, they are unpredictable. If rates increase significantly, your total repayment cost could end up being much higher than with a fixed-rate loan.
how do I qualify for federal vs. private loans?
Eligibility for federal student loans is determined by completing the FAFSA Free Application for Federal Student Aid). Most don’t require a credit check (except PLUS loans), which assess your credit history. On the other hand, private student loans rely heavily on your creditworthiness for approval. If you don’t have a strong credit history, you may need a co-signer.
Looking to improve your credit score? Here are actionable tips to help boost your financial profile and open up more borrowing options.
can I combine federal and private student loans?
Yes, you can use both federal and private student loans to cover your education costs, but it’s important to understand how they work together and how repayment will differ.
Federal loans are typically the first choice for students because of their lower interest rates, flexible repayment options, and borrower protections like income-driven repayment plans and loan forgiveness programs. Private loans, on the other hand, can help fill the gap if federal loans, scholarships, and grants don’t fully cover your cost of attendance.
Psst... If you combine federal and private loans, prioritize paying off higher-interest loans first to save money and stay organized with a clear repayment strategy. Use budgeting tools or speak with a financial advisor to stay on top of payments and avoid missing due dates. |
to help... here are some debt payment strategies that I used that have helped me pay off my debt.
federal vs. private: which student loan is right for me?
Start with federal loans if you can. They’re more flexible and student-friendly, making them the best option for most borrowers. But if federal aid doesn’t cover everything, a private loan could be a helpful supplement—just be sure to shop around and read the fine print.
Here's a quick side-by-side look at both loans.
Other Loan Options to Help Pay for College
Federal loans are the most student-friendly, and private loans can fill funding gaps, but state-based and institutional loans are also worth exploring. State loans, offered by state agencies, often feature competitive rates and benefits for residents or in-state students. Institutional loans, provided directly by colleges, may offer flexible terms tailored to students’ needs. Be sure to research all options carefully to find the best fit for your situation.
does skyla offer student loans?
Skyla offers student loans in partnership with Sallie Mae®. These loans are designed to help undergraduate and graduate students, as well as parents, fund higher education at degree-granting institutions. Interested?
what’s next?
Before borrowing, always maximize free money like scholarships and grants. Here are more scholarships with upcoming deadlines in 2025. 2025 Scholarships>
QUICK TIP: Each May, Skyla awards $5,000 Herman Hoose Scholarships to deserving students who are graduating from high school in the current school year and enrolling in an institution of higher education for the fall of that same year. Want to learn more? Check it out > |
If loans are necessary, start with federal options for their flexibility and borrower-friendly features. Then, explore private loans if you need extra funding, or consider state-based and institutional loans as alternative options for competitive rates and tailored terms.
have questions or Need further assistance?
Our Customer Service Representatives are ready to help! Whether it’s understanding federal vs. private loans, creating a budget, or planning your repayment strategy. Feel free to contact our customer service representatives by email or give us a call at 704.375.0183.
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