Everything You Should Know About Repaying Federal and Private Student Loans

For many students, paying for advanced studies beyond highschool is their number one financial priority. If you don’t have enough investments or cash savings to fund your higher education, you will probably want to investigate various loan options.

There are mainly two kinds of student loans: federal loans and private loans. Federal student loans are offered by the federal government. On the other hand, private student loans are given by a lending institution like a bank, state agency, credit union, or school.


There are many differences between private loans and federal loans. In the case of federal loans, you have to start repaying the loans only after graduation. In the case of private student loans, repayment may start immediately. If you default on your monthly payments, your credit rating will suffer.

When should you take a private loan?

Private student loans are worth considering in certain situations. For example, if you have a good job waiting for you, obtaining a private loan is not a bad idea because your job will earn you enough money to pay off your debts. Generally speaking, private student loans should be the last option you consider. If it is the only means of paying for your studies, you should consider going to a less expensive school.

Repaying Loans

Repaying private loans is not easy. In fact, several factors can make it more difficult than you would imagine. You will probably want to pay off your loan early to avoid paying more interest. However, some lenders charge a prepayment penalty.

Federal student loans can be retired either partially or fully if you are willing to do a couple of years in service-related programs like Teach for America or Peace Corps. Students who find it difficult to repay their loan may be eligible for postponement, consolidation, or forbearance options. If a student dies or sustains injuries that disable him, the loan may be retired.

Repaying private loans is tougher. These loans don’t offer flexible payment or forbearance options. In addition, these loans may also require you to find a cosigner who will be responsible for repaying the loan if you fail to make your payments. And if the student dies before the loan is paid off, the lender may chase the cosigner.

SM Law Group Can Help

Although private loans are easier to obtain than federal loans, most students prefer federal loans. Contact us at SM Law Group to learn more about repaying your student loans.