A loan is a loan, right? You borrow money, you pay it back. So it can feel like it shouldn't matter much who you borrow from. With , it matters enormously: two loans for the exact same amount can turn into completely different futures. If no one in your family has borrowed for school before, this is the difference worth understanding first.

What makes federal loans different

Federal student loans come from the government, and they carry built-in protections that private loans usually don't. Those protections are no small perks; they're what keeps a rough patch from becoming a disaster.

  • Fixed interest rates set by law, so your rate can't suddenly jump on you.
  • [Income-driven repayment](/learn/government-aid/income-driven-repayment): your monthly payment can be tied to what you earn.
  • Pauses when life hits: options to postpone payments if you lose a job or hit hardship.
  • Possible [forgiveness](/learn/government-aid/student-loan-forgiveness) through certain public-service or repayment programs.

Where private loans come in

Private loans come from banks, credit unions, and online lenders. Some are fine. But the rate often depends on your credit (or a 's), it can be variable, meaning it climbs over time, and you generally don't get the safety nets above. Miss payments and there's far less room to breathe.

Tip
If a lender reaches out first with a slick offer, slow down. The better deal is the federal aid you go looking for through the , not the loan that finds you in your inbox.

The order that protects you

Use up free money first: and , which you never repay. Then federal loans, up to what you actually need. Only if there's still a real gap do you consider a , and even then, borrow as little as you can.

Federal almost always goes first. Same borrowed dollars, but federal loans bend when your life does; private loans usually don't.

For the 2026–27 school year, federal Direct Loans for undergraduates carry a 6.52% fixed rate, and a can borrow $5,500 their first year, $6,500 their second, and $7,500 each year after, up to $31,000 total. (Rates reset every July for new loans; a loan keeps the rate it started with.) One more layer worth knowing before you accept an offer: federal loans themselves come in two types, subsidized and unsubsidized, and the difference is real money.