Federal vs. private student loans: What's the difference? – CBS News

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By Rachel Layne
/ CBS News
President Biden’s student loan forgiveness program was announced in August and applications are likely to be available in October, bringing potential relief to millions of federal student loan borrowers. 
If you have student loans, you may be wondering if you qualify. The first thing to know is the relief only applies to federal student loan borrowers. Private student debt won’t be part of the forgiveness program. 
Private student loan holders should instead consider refinancing to free up cash. They can easily get started right now.
But what’s the difference between private and federal student loans? Here’s what to know.
Federal student loans generally have more favorable terms. They offer forgiveness, cancellation and discharge alternatives in addition to the plan announced by the Biden administration.
Private loans can fill a gap when public loans, scholarships, fellowships, subsidies and grants aren’t enough to pay for school, but without the same government payback options like deferral or forgiveness.
If you’re looking for a loan to help fund your education, you have multiple options to pursue. You can easily get started today.
If you applied for your loan directly through the Free Application for Student Aid (FAFSA) form and were approved, you likely have a public student loan. Federal student loans come in specific forms from the U.S. Department of Education:
Private, or non-government administered, student loans are offered by a variety of financial institutions such as banks, credit unions and other financial companies. They’re also the only type of the two that offers conventional refinancing options, which may be a good alternative if forgiveness isn’t available for your loans. You can explore your private student loan refinance options now to see if you can save cash.
In both cases, you’re borrowing money to pay for school and should consider your ability to make payments once you graduate, including your anticipated income.
Both public and private loans:
What type of loan you need depends on your personal situation.
Financial regulators and experts recommend researching and exhausting all avenues for public student aid, scholarships, fellowships, and borrowing before investigating private loans. 
Some states also provide low-cost loans for students.
Whatever fits your needs, experts warn you should never pay with credit cards, which carry much higher interest rates than student loans, public or private. Thoroughly research your options. An online financial adviser can also help steer you in the right direction.
First published on September 8, 2022 / 8:25 AM
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