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Federal Student Loans vs Private Student Loans

This article will explain the differences between Federal student loans and Private student loans. It is important to understand the benefits of both types of loans to make the best financial decision for your education.
Federal student loans are made by the government, with terms and conditions that are set by the U.S. Congress and include benefits that include fixed interest rates and income-driven repayment plans that are not typically offered with private loans.
Private student loans are made by organizations such banks, credit unions, and state-government or state-affiliated organizations, and have terms and conditions that are set by the lender. Private student loans may be more expensive than federal student loans.  Private loans differ from lender-to-lender so be sure you understand all terms and conditions of your private loan.
The Arkansas Student Loan Authority (ASLA) offers Arkansas Education Loans.  This private student loan is for undergraduate and graduate students who are Arkansas residents or who are attending a college or university in Arkansas.  ASLA’s interest rates are typically some of the lowest in the nation compared to other private loan lenders.

Federal Student Loans:

  1. Federal Student Loan payments aren’t due until after you graduate, leave school, or change your enrollment status to less than half-time.

  2. The interest rate is fixed on federal student loans and may be lower than private loans—and much lower than some credit card interest rates.               

  3. If you have financial need, you may qualify for a loan for which the government pays the interest while you are in school and during certain other periods. This type of loan is called a subsidized loan.

  4. You do not need to get a credit check to qualify for most federal student loans. For PLUS loans, or parent loans, your credit is checked before determining whether you are eligible.

  5. Federal student loan interest payments are usually tax deductible.

  6. Federal student loans can be consolidated into a Direct Consolidation Loan. 

  7. If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments. 

  8. There are several repayment plans for federal student loans, including an option to tie your monthly payment to your income.

  9. You may be eligible to have some portion of your student loans forgiven if you work in public service or after you have completed the repayment term in an Income Driven Repayment Plan.

Private Student Loans

  1. Private student loans may require payments while you are in school, but will often allow you to defer, or put off, payments while in school.

  2. Private student loans can have variable or fixed interest rates, which may be higher or lower than the rates on federal student loans depending on your circumstances.

  3. Private student loans are often not subsidized. In the case of an unsubsidized loan, you will be responsible for all the interest on your loan.

  4. Private student loans often require an established credit record or a cosigner.

  5. Interest may be tax deductible on private student loans.

  6. Private student loans cannot be consolidated into a Federal Direct Consolidation Loan but may be refinanced.

  7. You should check with your private loan lender to find out about possible options for postponing or lowering your loan payments.

  8. You should check with your private loan lender to find out about your repayment options.

  9. You need to make sure there are no prepayment penalty fees.

  10. Although many private lenders do not offer loan forgiveness programs, a few private student loans from state agencies can be forgiven in certain circumstances.

Arkansas Education Loan for Students

The Arkansas Education Loan for students is for undergraduate and graduate students who are Arkansas residents or who are attending a college or university in Arkansas. Applicants who do not meet the underwriting and credit criteria on their own may apply with one or two cosigners. The loan features: 

  1. Fixed and variable rates.

  2. Multiple repayment options.

  3. An interest rate reduction for using auto-debit during repayment.

  4. A cosigner release option.

There are three different in-school payment options for the Arkansas Education Loan so that you can choose the one that works with your financial situation. Each payment option has its own set of rates that are provided before you apply. Learn more at