The other type of student loan is the private one. It is advised to apply for a private student loan only if the scholarships and federal loans are not enough, because the private student loans are a little harder to get, and they do not offer so many benefits as the federal loans. In many of the cases a cosigner is needed, but a credit check is always performed, so less people have access to a private student loan.

It should be clear by now that the right decision is choosing a federal student loan instead of a private one. For those who are not convinced yet, here are some facts about the repayment of the loans. In case of federal loans there are many ways to repay it: standard repayment, extended repayment, graduated and income sensitive repayment. Only those can choose from these repayment options that had chosen the federal loan. The standard repayment plan is the lowest cost; the person will make monthly payment, both interest and capital. For those who cannot afford the standard repayment, the extended payment might work: they will have to pay a smaller amount of money each month, but for a longer period of time. In case of the graduated repayment plan, the person can choose to pay only the interest for a period of at most four years, but then the monthly payments’ amount will grow. The last type, income sensitive repayment is very interesting: the payments are based on the person’s monthly income, they can be somewhere between 4 and 25 % of the income, as long as at least the interest is repaid. For private student loans there are not this many options: during the school period the debtor has to make monthly interest payments and during six months after graduation. After this period the debtor has some options to make a repayment plan, but he has to pay the interest during his school years.

Federal student loans offer many benefits, not only the repayment is more convenient. Interest rates are regulated by the government, and so they are lower than in case of other loans, almost anyone is eligible, since they do not check the applicant’s credit score or credit history, and the repayment plans are very friendly. As an advice: one should ask for a private student loan only after he notices that the federal one does not cover his needs.

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