Types of Student Loans: Public, Private, and Everything In Between

There are two main types of student loans — federal and private — and each has its own advantages and disadvantages.

Federal Student Loans
The most common type of loan is a federal student loan, which is funded by the U.S. Department of Education and typically comes with lower interest rates than private loans. Public loans also don’t require credit checks or co-signers (except for PLUS Loans). Plus, they offer other perks like flexible repayment plans, income-driven repayment plans, and even potential forgiveness options after a certain number of payments have been made.

Private Student Loans
Private student loans are offered through banks or other financial institutions and usually require a cosigner since these lenders view you as a higher-risk borrower due to your lack of credit history or low-income level. They also tend to come with higher interest rates than federal loans but may be an option if you don’t qualify for other financing options or need additional funds beyond what is available through federal aid programs.

While they tend to have interest rates than federal loans, they tend to be lower interest rates than other types of consumer debt (like credit cards). They also come with fewer repayment options—so if you think there’s a chance you won’t be able to make full payments every month due to an unexpected change in circumstances (like unemployment or illness) then it may not be the best option.

Other alternatives for paying for school

  • scholarships/grants are generally offered by nonprofit organizations or government agencies and do not need to be repaid upon completion of school – they are essentially free money!
  • Employer tuition assistance programs provide employers with tax benefits when they offer employees tuition reimbursement for job-related educational expenses.
  • There are also home equity lines of credit (HELOCs) which allow homeowners to borrow against the equity in their homes in order to cover educational expenses; however, these should only be used as a last resort since they typically come with higher interest rates than other types of debt and may leave borrowers “house-poor” if they aren’t careful!