Federal student loans follow guidelines set forth by the U.S. Department of Education and typically offer fixed and lower interest rates compared to private student loans. However, federal loans, unlike most private loans, have borrowing limits, which may not allow a student to borrow enough to cover the entire cost of education.
Private loans help students fill the funding gap between the cost of attending school and the amount of federal loans, grants, and available scholarships.
Both private and federal student loans typically allow students to defer full principal and interest payments while in school and some offer economic forbearance options once a student completes school. Unlike federal loan programs, private lenders assess the credit history of the borrower and cosigner before making a loan.