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Private loans

Private student loans are offered by banks, credit unions, state loan programs, and non-federal institutions. Everything from a Sallie Mae loan to a loan offered by your university is considered a private loan. These are not need-based like some federal loans. 

There are two main benefits to private student loans:

  • You may qualify for a higher borrowing limit
  • You may qualify for a lower interest rate if you have great credit

The drawbacks include:

  • Many come with a variable interest rate. This means that it can increase as the federal interest rate increases. They are not subsidized, so interest will start accruing when you take out the loan.
  • Private student loans offer less flexibility in terms of repayment. You cannot get your private student loans forgiven, and you are not eligible for an income-driven repayment plan. Some private student loans even require you to start making payments while you’re still in school.

Difference between Subsidized & unsubsidized loans

For direct subsidized loans, the Department of Education will pay the interest on them while you’re enrolled in school at least half-time, during your grace period, and during any period of deferment. 

For direct unsubsidized loans, interest accrues while you are enrolled in school and you are responsible for paying both the interest and the loan.


Subsidized Loans

  • Only available to undergraduate students 
  • Only available to students who are able to demonstrate financial need. The amount of money received cannot exceed the financial need.


  • No requirement to demonstrate financial need 
  • Available to both undergraduate and graduate students

Payback time

Both types of loans are not required to be paid back while you are enrolled in school, and are subject to a 6-month grace period post graduation. Student loan payments commence six months after a student finishes school or drops below six semester hours of study. Any student who has difficulty finding a job or making enough money to cover living expenses can request a deferment to delay payments until finances stabilize.