Federal vs. private student loans: How to choose (and why it matters)

Have you decided to return to school? Investing in yourself is money well-spent, as it can lead to personal growth and the potential to increase your income with honed skills and new degrees. But how do you plan to finance it?

The way you choose to fund your education can either help you toward your goal or hamper it. Here’s how to choose between federal student loans and private student loans by asking yourself some simple questions.

What are federal vs. private student loans?

When it comes to financing your education, you’ve got two options for borrowing, broadly speaking: federal student loans and private student loans. Let’s quickly define each.

Federal student loans

Federal student loans are government-funded loans issued by the U.S. Department of Education. They’re standardized in terms of borrowing amount, interest rates, and protections (we’ll cover those in a minute).

In lieu of a credit check as required for most loans, you’ll open a federal student loan by filling out a Free Application for Federal Student Aid (FAFSA). This makes federal student loans very accessible, as even those with bad or thin credi...