How to Compare Student Loans: Federal vs. Private, Side by Side

What to Compare When Evaluating Student Loans

Choosing a student loan is a significant financial decision. While the interest rate is a central factor, it is not the only one. Federal loans and private loans differ in several important ways, including fees, repayment flexibility, borrower protections, and eligibility requirements. A systematic comparison helps you see the full picture.

This guide provides a clear framework for comparing loans side by side. We'll look at the key criteria—interest rates, fees, repayment options, protections, and eligibility—and then apply that framework to the most common federal and private loan options.

• Interest rate: fixed or variable, and how it affects your monthly payment.
• Fees: origination fees and other costs that add to the total loan amount.
• Repayment options: income-driven repayment, deferment, and forbearance.
• Borrower protections: forgiveness programs, discharge options, and co-signer release.
• Eligibility: credit checks, co-signer requirements, and borrowing limits.

Sources: Federal Student Aid, U.S. Department of Education, University of California, Los Angeles, University of Virginia Student Financial Services

Federal Loan Comparison: Subsidized, Unsubsidized, and PLUS

Federal student loans are funded by the U.S. Department of Education and offer fixed interest rates and a range of borrower protections. The main federal loan types are Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. Each has different features, as summarized in the table below.

Important changes took effect on July 1, 2026: Grad PLUS loans are no longer available for new graduate and professional students, and new borrowing limits apply to Parent PLUS loans and Direct Unsubsidized Loans for graduate and professional students.

• Direct Subsidized Loans are based on financial need, and the government pays the interest while you're in school at least half-time, and during grace periods and deferment.
• Direct Unsubsidized Loans are not based on financial need, and you're responsible for all interest that accrues, even while in school.
• PLUS Loans require a credit check. Parent PLUS loans are available to parents of dependent undergraduate students; Grad PLUS loans are no longer offered to new borrowers as of July 1, 2026.
• Annual borrowing limits for federal Direct Unsubsidized Loans are $20,500 for traditional graduate students and $50,000 for professional students, starting July 1, 2026.
• Parent PLUS loans are capped at $20,000 per student per year and $65,000 aggregate per dependent student, starting July 1, 2026.

Sources: Federal Student Aid, U.S. Department of Education, University of California, Los Angeles, University of Virginia Student Financial Services, The George Washington University Office of Student Financial Assistance

Private Loan Comparison: What to Look For

Private student loans are offered by banks, credit unions, and online lenders. They can have fixed or variable interest rates, and the rate you receive depends on your creditworthiness, income, and other factors. Private loans may require a co-signer, especially for undergraduate students with limited credit history.

When comparing private loans, pay attention to the range of interest rates, any fees, the repayment term, and the lender's policies on deferment, forbearance, and co-signer release. Terms vary by lender, so read the loan agreement carefully.

• Interest rates: private loan rates are credit-dependent and can be fixed or variable; the specific rate you receive will depend on your credit profile and the lender.
• Fees: most private lenders do not charge an origination fee, but check for late fees and other charges.
• Eligibility: private loans typically require a credit check, and a co-signer is often required for undergraduate students.
• Borrower protections: private loans generally do not offer income-driven repayment or loan forgiveness programs.

Sources: Texas Christian University Financial Aid, University of Illinois System Student Money Management Center

Interest Rates and Total Loan Cost

Interest is the cost of borrowing money, and it has a huge impact on what you'll ultimately repay. Federal student loans offer fixed interest rates set by Congress each academic year. For loans first disbursed between July 1, 2026, and June 30, 2027, the fixed rates are 6.52% for undergraduate Direct Subsidized and Unsubsidized Loans, 8.07% for graduate and professional Direct Unsubsidized Loans, and 9.07% for Direct PLUS Loans.

Private loan interest rates, by contrast, are based on your creditworthiness and can be fixed or variable. A lower rate may seem appealing, but a variable rate can rise over time, potentially making the loan more expensive than a fixed rate in the long run. To compare total cost, consider the APR (annual percentage rate), which includes both the interest rate and any fees.

When comparing loans, use the APR as a standardized measure. The total amount you'll pay is influenced by the loan amount, the interest rate, and the repayment term. A lower rate does not always translate to the lowest total cost if the term is longer or fees are higher.

• Federal origination fees: Direct Subsidized and Unsubsidized loans have an origination fee of 1.057%; PLUS loans have a fee of 4.228%.
• Most private student loans do not charge an origination fee.
• Always compare APRs rather than just the nominal interest rates.

Sources: Federal Student Aid, U.S. Department of Education, University of California, Los Angeles, University of Virginia Student Financial Services

Federal vs. Private: Protections and Benefits at a Glance

The biggest difference between federal and private loans is the level of borrower protection. Federal loans come with benefits that are not typically available on private loans, including income-driven repayment plans, loan forgiveness programs, deferment, forbearance, and, in some cases, loan discharge.

Private loans, on the other hand, are governed by the contract you sign and state law. They may offer some flexibility, but they generally lack the income-based safety nets of federal loans. Some private lenders do offer co-signer release, which can help you remove a co-signer after making a track record of on-time payments.

Sources: Federal Student Aid, U.S. Department of Education, University of California, Los Angeles, University of Virginia Student Financial Services, The George Washington University Office of Student Financial Assistance, The Institute for College Access & Success, Texas Christian University Financial Aid, University of Illinois System Student Money Management Center, Henssler Financial

A Step-by-Step Approach to Comparing Loan Offers

When you receive a loan offer, you can use a systematic process to evaluate it against other options. First, gather the loan documents and identify the key terms: the interest rate, APR, fees, repayment term, and any borrower benefits.

Next, use the comparison criteria from this guide to create a checklist. For federal loans, note whether the loan includes income-driven repayment and forgiveness options. For private loans, look for the specific terms related to deferment, forbearance, and co-signer release.

Finally, calculate the total cost of each loan under a typical repayment scenario. A payment formula can help, but you can also use the APR to compare costs. The lowest APR is not always the best deal if one loan offers more protections or flexibility.

1. Identify the interest rate, APR, fees, and repayment term for each loan offer.
2. Determine whether the loan is fixed or variable rate.
3. List the borrower protections available: income-driven repayment, forgiveness, deferment, forbearance, co-signer release.
4. Check the eligibility requirements: credit check, co-signer, borrowing limits.
5. Estimate the monthly payment and total cost over the life of the loan using the APR.
6. Consider your future income and the flexibility you might need.
7. Choose the loan that best fits your overall financial situation, not just the lowest rate.

Sources: Texas Christian University Financial Aid, University of Illinois System Student Money Management Center

Comparison Matrix: Federal vs. Private Loan Features

The table below consolidates the key loan types and their defining features, drawing on data from federal and educational sources. Please note that federal loan terms reflect the 2026-2027 academic year, and private loan terms are illustrative of typical offerings, as specific rates and terms vary by lender.

Sources: Federal Student Aid, U.S. Department of Education, University of California, Los Angeles, University of Virginia Student Financial Services, The George Washington University Office of Student Financial Assistance, Henssler Financial, The Institute for College Access & Success, Texas Christian University Financial Aid, University of Illinois System Student Money Management Center