Which Type Of Student Loans In The US Is Best, Federal Or Private?

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Millions may struggle to repay student loans if 'pause' expires in May,  study says

There are two broad categories of student loans: federal or private. Federal loans are offered by the U.S. Department of Education and, for most students, are the more attractive option. That’s because federal student loans offer things that most private lenders don’t, including:

  • A fixed interest rate that isn’t based on your creditworthiness; all borrowers are offered the same standard rates
  • More flexible repayment plans, including options that allow you to base your monthly payments on your income
  • More lenient deferment and forbearance options
  • Several loan forgiveness and loan discharge programs that you might qualify for

For these reasons, most borrowers turn to federal student loans first. However, private student loans can still be worthwhile in some circumstances. If you have excellent credit, for example, private student loans may offer better interest rates than the standardized federal rates. Private student loans can also be useful if you have gaps in your college funding and need extra cash.

The exact terms of private student loans vary by lender, but you can expect to find the following in many private loans:

  • The ability to choose between fixed and variable interest rates
  • A simpler application process
  • Low or no origination fees
  • The ability to add a co-signer if your credit isn’t sufficient

source:Forbes Advisor.com

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