Federal vs Private Education Loans

Federal vs Private Education Loans

Let’s face it, medical school is incredibly expensive. And unless you’re in the slim minority, there’s a strong chance you will have to rely on some form of financial aid in order to receive your medication. Federal and private loans can help a student carry the burden of paying for medical school, but is one better than the other?

We’ll explore the differences, similarities and benefits associated with federal and private education loans below.

Federal Education Loans

Federal education loans are available to American students that attend school in the United States. A wide variety of repayment plans are available for federal loans, including some that are based on household income. Student may become eligible for forgiveness of loans through a number of programs, such as PSLF (Public Service Loan Forgiveness).

Students can delay payment of federal loans while completing residency through deferment, forbearance and grace options. You can also consolidate federal loans with the help of the Direct Consolidation Loan program. Federal education loans also generally offer affordable interest rates.

Private Education Loans

Private education loans can be vastly different from their federal counterparts. Private loans are offered through various lenders and are typically not associated with any school. Private education loans typically offer programs with variable or fixed interest rates. Variable rates have the potential to be low at the beginning of the loan, but could skyrocket down the road. Private education loan rates are largely dependent on the borrower’s credit history. A student may need to find someone to co-sign with them in order to get a loan.

On the plus side, you may not have to begin repaying private education loans while you are still in school or residency. This, however, varies from lender to lender. Private loans are typically for students that can’t receive federal student aid, or if the borrower is guaranteed a level of income in the near future that will allow for quick repayment.

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