Private student loans: the gap-filler, not the first choice
Private student loans come from banks and online lenders, and a strong credit profile can beat the federal rate on paper. What that comparison hides is everything federal loans carry that private ones do not — which is why private loans belong last, after you have exhausted federal aid.
A private lender competes on rate, so a borrower (or cosigner) with excellent credit can sometimes beat the federal number. But private loans lack income-driven repayment, forgiveness pathways, and the deferment and discharge protections that make federal loans safe when life goes wrong. Those protections are the product — a low rate is worth little the month you lose a job and discover you cannot pause payments.
That is why the order matters. Exhaust federal aid first: subsidized loans, then unsubsidized, then consider a private loan only to close a remaining gap between aid and cost. Most private loans also require a creditworthy cosigner for undergraduates, who stays on the hook until the loan is paid or released.
The one place private wins cleanly is refinancing for a high earner who will never use federal protections — but refinancing a federal loan into a private one is permanent and surrenders every safety net. For most borrowers, that trade is a mistake. Compare the true cost, not just the rate, in the loan calculator.
Questions people ask
Are private student loans a good idea?
Only after federal aid is exhausted. They can carry a lower rate for excellent-credit borrowers, but they lack income-driven repayment and forgiveness, so use them to fill a gap — not as your primary borrowing.
Do private student loans require a cosigner?
Usually, for undergraduates — most private lenders require a creditworthy cosigner because students have thin credit. The cosigner is fully liable until the loan is paid off or formally released, which some lenders allow after a track record of on-time payments.
Can I refinance federal loans into a private loan?
Yes, but it is permanent and forfeits every federal protection — income-driven repayment, forgiveness, deferment. It only makes sense for high earners with stable income who will never use those benefits.
Fixed or variable rate on a private student loan?
Fixed is safer for a loan you will hold for years — the payment never rises. Variable starts lower but can climb. Choose variable only if you expect to repay quickly, before rate increases erase the initial savings.