BMI Federal Credit Union
Private v Federal Student Loans
It's never too early to start saving for college! As tuition costs rise, it's important to think ahead - and luckily, with some smart planning, it's easy to prepare for the future. While many plan ahead by starting a 529 Plan for their children, most still find themselves needing to pay for a significant portion of their college by other means.
The most common route is for a student to take a loan in order to pay for college, with the ability to pay it back after they graduate. There are several student loan options, but most questions focus around the types of student loans.
Private versus Federal Student Loans
Student loans can be secured from the Federal government or from private institutions. On the surface, they perform the same basic function: to pay for college. With either program you pay the loan back at a later date.
In general, securing a Federal student loan is a preferable option, as it provides the overall largest flexibility to the individual student. Federal student loans are monies borrowed from the government at a competitive interest rate. Because it is a federal program, there are many entitlements that private loans do not have to offer. Federal student loans generally offer a wider array of payment options and flexibility if you have trouble paying the loan back later.
Private student loans are college loans offered by banks or other private lenders. They are a great way to pay for college, too. Private lenders usually, however, require a credit check as part of the loan application process. Some Private student loans also have a variable interest rate, so pay attention to the rates and terms as part of the loan.
Student Loan Consolidation
Many students find that they may not be able to find a single source to pay for their college education. They may get a Federal student loan along with a Private student loan. After college, managing two loan payments may be a hassle. It is possible to consolidate your student loan into a single payment. This can be easier to manage and offer a lower interest rate, especially if your Private student loan had a variable rate.
If you would like some guidance about consolidating your student loan, or would like to discuss ways to pay for college, you can stop in any one of our locations, or talk to one of our Certified Financial Counselors. It's important to make sure you've enrolled in the best plan for your savings needs so paying for college doesn't seem so overwhelming.