The two loan types differ most in protections. Federal loans come with benefits that private loans rarely match.
Federal loans
Direct loans have fixed rates set by Congress, no credit check for most undergraduate loans, and access to income-driven repayment, deferment, forbearance and certain forgiveness programs. Recent legislation changes some borrowing limits and plans for loans made after mid-2026, so check studentaid.gov for current rules.
Private loans
Private lenders base rates on credit and often require a cosigner. Rates can be fixed or variable, and borrower protections are limited. Good credit can mean low rates, but there is typically no income-driven plan or federal forgiveness.
Refinancing
Refinancing federal loans into a private loan may lower the rate, but it permanently forfeits federal protections. Consider it only if you have stable income, an emergency fund and do not need forgiveness or income-driven repayment.
Try the numbers
Use our Student Loan Payment Calculator to see this in practice. With its default example (Loan balance: $38,000; Interest rate: 6.5%; Your planned term (years): 10), it shows monthly payment: $431. Adjust the inputs to match your situation.
Key takeaways
- Federal loans offer stronger protections.
- Private loan rates depend on credit.
- Refinancing federal loans forfeits federal benefits.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.