Office of Financial Empowerment
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Federal and Private Student Loans

With the increasing cost of college tuition, scholarships and government financial assistance may not be enough to cover the entire bill. Many students and parents need to take out loans to help pay for higher education. Like other loans, student loans must be repaid. You should pursue federal student loans (e.g., Stafford Loans, Direct Loans, FFEL Loans or Perkins Loans) before applying for private loans from financial institutions.





Include many protections often not available from private lenders, such as interest rate caps. A cap means the interest will not exceed a specified rate.                                        

Offer variable interest rates that may change every year.  

Usually offer a variety of ways to handle payments should personal circumstances make repayment difficult.

Private lenders are not required to provide repayment options should a personal circumstance make repayment difficult.


You don't have to start repaying your loans until you graduate or drop out of school.

Some private student loans require you to start making repayments immediately after you sign the loan agreement.


Students with financial need may qualify to have the government pay loan interest while they are in school.

Interest accrues while you are in school and you are responsible for paying the loan and the related interest and fees.


You don't need a credit record or a cosigner to get a federal student loan.

In some instances, a cosigner may be needed to obtain a student loan. In addition, without a credit record (which most students have not established yet), interest rates for private loans are usually higher than federal student loans.


If you have a dispute, you can bring your case to court.

If you have a dispute, most private loans require mandatory arbitration rather than allowing you to file your claim in court.


Learn more about student lending, including the Student Bill of Rights,
at the New York State Attorney General Web site