Reviewed September 2026.
Federal student aid (Pell Grants, Direct Subsidized/Unsubsidized Loans, work-study, and related programs you reach through the FAFSA) and private student loans (bank, credit-union, or specialty education lenders) are different products. Compare cost, protections, and who is on the hook before you fill a tuition gap with private debt. Payoff map: Paying off student loans basics. FAFSA steps: Fill out the FAFSA without missing aid.
Side-by-side comparison
| Factor | Federal (Direct / aid package) | Private student loan |
|---|---|---|
| How you start | FAFSA → school aid offer | Lender application; often credit + income underwrite |
| Interest | Fixed rates set by Congress for each award year | Fixed or variable; priced to credit/cosigner |
| Need-based help | Pell, subsidized interest while in school (if eligible) | Rarely need-based; underwriting only |
| Repayment tools | IDR plans, deferment/forbearance rules, forgiveness tracks | Lender hardship options only; no federal IDR |
| Credit check for student Direct Loans | Typically no FICO underwrite for Direct Loans to students | Hard pull common; cosigner often required |
| Parent debt option | Parent PLUS (parent is borrower) | Parent can cosign or borrow in own name |
How to stack the decision
- File the FAFSA early enough for state and school deadlines.
- Accept grants and scholarships first; they are not loans.
- Prefer Direct Subsidized (if offered) before Unsubsidized for the same enrollment.
- Add work-study only if the job hours fit your schedule and still leave study time.
- Treat private loans as a last layer after federal Direct limits and family cash/529 withdrawals.
- If a private quote needs a cosigner, price the household risk separately (Cosigning a loan).
Worked gap example
Sam’s net cost after grants is $18,400 for the year. Federal Direct Unsubsidized eligibility for the year is $5,500. Family cash and 529 cover $8,000. Remaining gap: $4,900.
| Fill the $4,900 with… | Upside | Downside |
|---|---|---|
| More family cash / part-time work | No new interest | Time and cash-flow strain |
| Parent PLUS (if parent qualifies) | Federal parent loan rules | Parent’s credit and repayment; origination fee |
| Private student loan at 9.5% variable with cosigner | Fills gap fast | Cosigner liability; no federal IDR |
Sam takes the Direct loan, keeps searching scholarships, and only shops private quotes for the leftover $4,900 after comparing Parent PLUS fees and the parent’s budget.
Three numbers on every private quote
- APR (and whether the rate is fixed or variable).
- Origination fee and total of payments on the posted term.
- Cosigner release rules in writing (months of on-time payments, credit score floor).
Repayment plan literacy once school ends: Compare student loan repayment plans. Private-only refinance later: Refinance private student loans.
Checklist
- Read the full aid offer: grants vs loans vs work-study.
- Exhaust Direct eligibility before private applications.
- Soft-prequalify private lenders when available; group hard pulls.
- Do not refinance federal into private just to “simplify” while you still need IDR or PSLF-style paths.
- Keep award letters and promissory notes in one folder.
Educational only. Not lending advice or an offer of credit. Federal rates, loan limits, and private underwriting change by year and lender.