Private vs. Federal Loans
& How to Decide Which One is Right for You
This page walks you through the key differences between private and federally held student loans. Remember that you can choose to use private, federal, or some combination of both loans to finance your education.
Private Student Loans
Private student loans are offered by private banks and lenders. These loans are available to finance your degree upfront and can also be used to refinance both private and federal loans after graduation. To apply for these loans, students must apply directly through the various lender websites.
How are private loan interest rates set?
Every private lender has their own unique underwriting process and standards for student loan applicants; these eligibility requirements help lenders decide whether to give an applicant a loan, and at what interest rate. As part of the loan application process, lenders will require a credit check to evaluate your ability to repay and how risky you are. If you have a credit score in the high 600s, you will likely qualify for a loan, and the higher your score is, the better rate you will be offered.
After you submit an application and receive approval for a private student loan, you typically will be presented with multiple options such as:
- Variable or Fixed Interest rates
- Loan Term (also known as Repayment Term)
- Repayment Plan
Federally Held Student Loans
Federally held student loans are offered by the federal government, whereas private student loans are offered by private lenders.
While there are many types of federally held student loans, U.S. Citizens and eligible non-citizens can typically access Direct Subsidized Loans (undergrads only), Direct Unsubsidized Loans, and Direct PLUS loans (also known as the Grad PLUS loans, only available to graduate students). Most applicants qualify, regardless of credit score.
How are federal loan interest rates set?
All federal student loan interest rates and fees are set by Congress on July 1st of each year and remain fixed for the life of the loan. Students who need financial aid apply for loans each academic year and rates differ from academic year to year (meaning that when you graduate, each loan for each year of school likely has a different interest rate).
For loans disbursed after July 1st 2024 & before July 1st 2025, the interest rates and fees are expected to be:
Maximum Loan Amount
Direct Subsidized Loans (Undergrad Only)
It depends on several factors. See here
Direct Unsubsidized Loans
$20,500
Direct PLUS Loans (Parents of Undergraduates and Graduate students only)
Up to cost of attendance minus other aid received.
Interest Rate
Direct Subsidized Loans (Undergrad Only)
6.53%
Direct Unsubsidized Loans
8.08%
Direct PLUS Loans (Parents of Undergraduates and Graduate students only)
9.08%
Origination Fee**
Direct Subsidized Loans (Undergrad Only)
1.057%
Direct Unsubsidized Loans
1.057%
Direct PLUS Loans (Parents of Undergraduates and Graduate students only)
4.228%
| Direct Subsidized Loans (Undergrad Only) | Direct Unsubsidized Loans | Direct PLUS Loans (Parents of Undergraduates and Graduate students only) | |
| Maximum Loan Amount | It depends on several factors. See here | $20,500 | Up to cost of attendance minus other aid received. |
| Interest Rate | 6.53% | 8.08% | 9.08% |
| Origination Fee** | 1.057% | 1.057% | 4.228% |
*These rates and fees are set each academic year and take effect on July 1st
**Origination fees vary slightly based on when you take out your loan in the school year. The fee is updated every year for loans disbursed on or after October 1st, meaning that if you borrow the same amount of money each semester, your origination fee will likely be different.
What’s the Difference?
There are pros and cons to both federal and private loans. At its most fundamental level, federal loans offer a type of “insurance”—protections that exist to help you with payments in the future if you don’t make enough money to make your monthly payments. However, this insurance comes at a cost in the form of higher interest rates.
In order to make an informed decision, it is important to understand your unique circumstances and future employment expectations, as well as what benefits federal loans could offer you. Only then will you be in a position where you can make an educated decision about what is best for you. The following chart outlines the key differences between federal and private student loans
Private vs. Federal Student Loan Comparison
Who is the lender?
Federal Loans
Direct Unsubsidized Loans
Federal Government
Grad PLUS Loans
Federal Government
Private Student Loans
Juno Negotiated Loan
Private Company
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Federal Government |
Private Company |
|
How much money can I borrow?
Federal Loans
Direct Unsubsidized Loans
Up to $20,500 towards the cost of attendance.
Grad PLUS Loans
This is determined by your FAFSA application and individual needs, but likely is remaining funds necessary to get to the cost of attendance.
Private Student Loans
Juno Negotiated Loan
The total cost of attendance or the total loan amount that you qualify for.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Up to $20,500 towards the cost of attendance. |
This is determined by your FAFSA application and individual needs, but likely is remaining funds necessary to get to the cost of attendance. |
The total cost of attendance or the total loan amount that you qualify for. |
Is there an aggregate loan limit?
Federal Loans
Direct Unsubsidized Loans
$138,500, including undergraduate loans.
Grad PLUS Loans
No
Private Student Loans
Juno Negotiated Loan
Varies
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
$138,500, including undergraduate loans. |
No |
Varies |
Are there Origination Fees?
Federal Loans
Direct Unsubsidized Loans
Yes. You pay 1.057% of the loan amount for loan amounts over $20.5k disbursed between 10/1/20 and 9/30/21.
Grad PLUS Loans
Yes. You pay 4.228% of the loan amount for loan amounts up to $20.5k disbursed between 10/1/20 and 9/30/21.
Private Student Loans
Juno Negotiated Loan
Juno works to eliminate all fees. This saves hundreds of dollars initially and over the life of the loan.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes. You pay 1.057% of the loan amount for loan amounts over $20.5k disbursed between 10/1/20 and 9/30/21. |
Yes. You pay 4.228% of the loan amount for loan amounts up to $20.5k disbursed between 10/1/20 and 9/30/21. |
Juno works to eliminate all fees. This saves hundreds of dollars initially and over the life of the loan. |
Do all borrowers get the same rate?
Federal Loans
Direct Unsubsidized Loans
Yes
Grad PLUS Loans
Yes, if you meet the low credit requirements
Private Student Loans
Juno Negotiated Loan
No, your initial rate is determined by your credit worthiness, then your Juno benefits apply
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes |
Yes, if you meet the low credit requirements |
No, your initial rate is determined by your credit worthiness, then your Juno benefits apply |
What is the interest rate for 2024-2025?
Federal Loans
Direct Unsubsidized Loans
Fixed at 8.08%
Grad PLUS Loans
Fixed at 9.08%
Private Student Loans
Juno Negotiated Loan
Varies based on the individual, repayment term, and whether it is a fixed or variable rate. [a]
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Fixed at 8.08% |
Fixed at 9.08% |
Varies based on the individual, repayment term, and whether it is a fixed or variable rate. [a] |
Does the rate change after graduating?
Federal Loans
Direct Unsubsidized Loans
Federal Interest rates stay fixed for the life of the loan unless you refinance, which requires you to switch to a private loan
Grad PLUS Loans
Federal Interest rates stay fixed for the life of the loan unless you refinance, which requires you to switch to a private loan
Private Student Loans
Juno Negotiated Loan
Graduates and alumni can refinance for
lower rates.
Juno members who refinance often save
significantly.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Federal Interest rates stay fixed for the life of the loan unless you refinance, which requires you to switch to a private loan |
Graduates and alumni can refinance for lower rates.
Juno members who refinance often save significantly. |
|
When does interest start accumulating?
Federal Loans
Direct Unsubsidized Loans
Immediately after disbursement
Grad PLUS Loans
Immediately after disbursement
Private Student Loans
Juno Negotiated Loan
Immediately after disbursement
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Immediately after disbursement |
||
What are the repayment term options?
Federal Loans
Direct Unsubsidized Loans
10 - 30 years
Grad PLUS Loans
10 - 30 years
Private Student Loans
Juno Negotiated Loan
5 - 20 years
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
10 - 30 years |
10 - 30 years |
5 - 20 years |
Are there unique protections?
Federal Loans
Direct Unsubsidized Loans
Yes. Federal loans best protections are benefits like Income Driven Repayment Plans and Public Service Loan Forgiveness . Carefully research whether these are important to you.
Grad PLUS Loans
Yes. Federal loans best protections are benefits like Income Driven Repayment Plans and Public Service Loan Forgiveness . Carefully research whether these are important to you.
Private Student Loans
Juno Negotiated Loan
No
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes. Federal loans best protections are benefits like Income Driven Repayment Plans and Public Service Loan Forgiveness . Carefully research whether these are important to you. |
No |
|
How do I apply?
Federal Loans
Direct Unsubsidized Loans
Fill out the FAFSA
Grad PLUS Loans
Fill out the FAFSA
Private Student Loans
Juno Negotiated Loan
Create an account with Juno to receive the negotiated offer . Feel free to shop it around; we are confident we found you a great rate.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Fill out the FAFSA |
Create an account with Juno to receive the negotiated offer . Feel free to shop it around; we are confident we found you a great rate. |
|
Is there a credit check?
Federal Loans
Direct Unsubsidized Loans
No
Grad PLUS Loans
Yes, for Grad PLUS loans, but most clear this.
Private Student Loans
Juno Negotiated Loan
Yes, for all loans.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
No |
Yes, for Grad PLUS loans, but most clear this. |
Yes, for all loans. |
Will a co-signer lower my interest rate?
Federal Loans
Direct Unsubsidized Loans
No, cosigners will not reduce your rate.
Grad PLUS Loans
No. However, one may be necessary to get a Grad PLUS loan if you have bad credit. Regardless, the same interest rate is offered to every student of each loan type.
Private Student Loans
Juno Negotiated Loan
Yes, applying with a cosigner who has good credit can lower your rate even more.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
No, cosigners will not reduce your rate. |
No. However, one may be necessary to get a Grad PLUS loan if you have bad credit. Regardless, the same interest rate is offered to every student of each loan type. |
Yes, applying with a cosigner who has good credit can lower your rate even more. |
Is there any way to get a lower interest rate?
Federal Loans
Direct Unsubsidized Loans
No
Grad PLUS Loans
No
Private Student Loans
Juno Negotiated Loan
Yes, you get significant discounts for good credit, a co-signer, autopay, and being a part of the Juno negotiation pool.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
No |
Yes, you get significant discounts for good credit, a co-signer, autopay, and being a part of the Juno negotiation pool. |
|
Are there payment deferment options?
Federal Loans
Direct Unsubsidized Loans
Yes
Grad PLUS Loans
Yes
Private Student Loans
Juno Negotiated Loan
Varies by lender
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes |
Varies by lender |
|
If I am married, are my student loans forgiven if I die?
Federal Loans
Direct Unsubsidized Loans
Yes, all federally held student loans are forgiven upon death or disability.
Grad PLUS Loans
Yes, all federally held student loans are forgiven upon death or disability.
Private Student Loans
Juno Negotiated Loan
Varies by lender.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes, all federally held student loans are forgiven upon death or disability. |
Varies by lender. |
|
How many months of payment forbearance are available?
Federal Loans
Direct Unsubsidized Loans
Time varies by circumstance and no cumulative limit. Interest still accrues.
Grad PLUS Loans
Time varies by circumstance and no cumulative limit. Interest still accrues.
Private Student Loans
Juno Negotiated Loan
Varies by lender, but many offer one month a year. Interest still accrues.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Time varies by circumstance and no cumulative limit. Interest still accrues. |
Varies by lender, but many offer one month a year. Interest still accrues. |
|
When are my first payments due?
Federal Loans
Direct Unsubsidized Loans
6 months after graduating or dropping below half-time enrollment.
Grad PLUS Loans
6 months after graduating or dropping below half-time enrollment.
Private Student Loans
Juno Negotiated Loan
Varies by lender, but 6 months at minimum.
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
6 months after graduating or dropping below half-time enrollment. |
Varies by lender, but 6 months at minimum. |
|
Is there an option to return excess loan funds if I borrowed more than I needed for the semester?
Federal Loans
Direct Unsubsidized Loans
Yes. Any funds that you return within 120 days of disbursement can be removed from your principal and you will not owe any accrued interest or origination fees on that amount . If you have more funds than your budget requires , it may be better to return them and borrow again the next semester to save on interest. If you return money after the 120-day window, you will owe interest and origination fees on the borrowed amount.
Grad PLUS Loans
Yes. Any funds that you return within 120 days of disbursement can be removed from your principal and you will not owe any accrued interest or origination fees on that amount . If you have more funds than your budget requires , it may be better to return them and borrow again the next semester to save on interest. If you return money after the 120-day window, you will owe interest and origination fees on the borrowed amount.
Private Student Loans
Juno Negotiated Loan
Yes, however you will also have to pay interest for the amount of time that you had the loan money (3 months = ¼ of 1 year of interest on the returned amount).
|
Federal Loans |
Private Student Loans |
|
|
Direct Unsubsidized Loans |
Grad PLUS Loans |
Juno Negotiated Loan |
|
Yes. Any funds that you return within 120 days of disbursement can be removed from your principal and you will not owe any accrued interest or origination fees on that amount . If you have more funds than your budget requires , it may be better to return them and borrow again the next semester to save on interest. If you return money after the 120-day window, you will owe interest and origination fees on the borrowed amount. |
Yes, however you will also have to pay interest for the amount of time that you had the loan money (3 months = ¼ of 1 year of interest on the returned amount). |
|
