Private Student Loans Vs Federal Student Loans

A student is primarily an individual enrolling in a specific school or educational institution and under whose wingmanship lessons are carried on for several hours daily for several months, years or even decades. The primary objective of a student during his/her time in the school is to acquire education, acquire skills and prepare oneself for the real world. Most schools aim at producing competent workers by ensuring that the student learns all the basics as well as essentials of learning and living in the real world. However there are certain schools that focus more on a particular profession or line of study thereby preparing their students better for making the career they want. Most of these schools have very strict rules on what students learn and how they progress and all this is done with the purpose of molding the individual into a professional who can make a difference in the world.

Most of these schools follow the principle of free school loans for students. These student loans enable the student to fund their higher studies and do away with the need to pay back any form of interest after graduation. The repayment schedule for student loans is generally based on the repayment of the principal amount and the grace period during which the student can borrow without any repayment for the rest of the period.

Federal student loan is the one that has the least amount of interest and allows a student the leeway to arrange for repayment. Federal loans are offered by the government. There are various schemes offered by the government for the repayment of these loans. Federal student loan repayment starts with the first year when you start your course. With this grace period, you have the flexibility to budget your money and plan the repayment in advance. Federal student loan interest rates are very low and most of the students find it easier to repay the loans sooner.

There are some private lenders that offer interest rates much higher than the federal student loans. Before deciding to opt for a particular private lender, the borrower must always check out the terms and conditions that they have for repayment of the loan. Some private lenders allow borrowers to extend the repayment period for an additional six months after the grace period has expired. There are certain other private lenders that provide a two or three year grace period but charge much higher interest rate. You must always consider all the pros and cons of the different types of loans before you decide to opt for one type over the other.

There are also unsecured loans available for students with bad credit history. In case of such a student, there are two options – the federal student loan program or the private loans offered by private lenders. If the borrower wants to pursue his education at an institution that does not offer the federal student loan program, he can go for the private loans as the private loans will have fixed interest rates as compared to the federal loans.

The federal student loans offer flexibility in repayment structure. They also offer more affordable monthly payments compared to the private student loans. It is important to remember that if the student completes his studies and gets a decent job then the federal government will continue to lend the student money even after the student graduates from college. As the student gets older, the amount of money that the government lends increases and when the student starts earning he must start repaying the loans to the government.