Federal and Private Student Loans | Student Loan Service

What are the Main Differences between Federal and Private Student Loans?

How to find the right payment options for your future

The difference between Federal and private student loans basically comes down to the difference between safety and speed.

If you’ve just gotten out of college and you haven’t found a stable income yet, then consolidating your Federal loans can be a good option for you to adjust your monthly payments to your current income and help you plan ahead.

If, on the other hand, you’re able to meet the benchmark test of making as much money in one year as the total value of your student debt, then private consolidation could be a good option for you. And if you’re able to refinance your loans at the current historically low interest rate of 3.86%, down from 6.8%, you could save 2.94% over the life of your loan, or $503 per year.

But there are some helpful Federal options you should consider before cost savings (note that these three options are not available through private lenders):

  • If you are out of work, you don’t want loan payments eating into your rent money.  That’s when you can use the Federal income-based payment program (PAYE) to keep your credit clean… and only pay what you can afford based on calculations by the Department of Education.
  • If you have gone into a profession such as: nursing, civil service, teaching or work in a correctional institution, the Federal government will forgive part of your debt if you meet certain criteria.
  • Or if you would like to extend the term of your loan, to lower the monthly payments, you can simply call your Federal loan officer and adjust your schedule.  And you can still make extra payments on your loans to lower your principal and avoid accruing too much interest in the future, without penalty.

There’s one more important point to take note of with private and federal student loan differences. If you decide to consolidate your loans to help yourself out, in one or more of the above situations, you are still able to refinance your loans with a private lender in the future, though you will lose the benefits and flexibility of the Federal programs.

But remember, that process only goes one way. Once you consolidate your loans with a private lender, the Federal loan programs are no longer an option.

We’ve got your back!

So what’s best for you? To find out what’s right for your life and finances, call our friendly student loan specialists at (877) 927 – 6859. The call is free and you’re welcome to ask all the questions you like. Let us help you make a plan of action for your future, take control of your finances and come out ahead in the long-run. For more information and helpful resources, visit our website at www.StudentLoanService.us!