Not all student loans are the same! Financial expert Ross Mac explains why federal loans are usually the better option. Choosing between federal and private student loans can be confusing, but knowing the difference can save you money and stress. On this episode of The Finance Couch, financial expert Ross Mac explains why federal loans are often the smarter choice. Federal loans come from the U.S. government and don’t require a credit check, making them accessible to students just starting out. They also typically offer lower interest rates and better protections, like flexible repayment plans. Private loans, on the other hand, come from private lenders and often have higher interest rates and fewer benefits. If federal loans don’t cover all your expenses, private loans can fill the gap, but they should be a secondary option.
I'm Ross Mack.
And I'm Andini.
Welcome to the Finance Couch.
Today, we're on a college campus in Los Angeles
with financial consultant Ross Mack,
helping students navigate their most common questions
on their financial journeys as young adults.
I'm Chi.
I'm 20 years old and I'm from Vietnam.
Hi.
Hey, hey. How are you?
I'm good.
My question today is,
what is the difference between federal and private student loans?
Federal student loans is a loan
that's going to be with the U.S. government.
For all intents and purposes, it is preferred over private.
Private is, you know, actual private companies,
private financial institutions that are going to loan you money.
However, from a federal standpoint,
you're not going to really require a credit check, right,
because they're giving loans to 18-year-old kids.
But they're also going to, on average, have a lower interest rate,
a lower APY.
In other words, you're going to owe them less money over time.
Now, private student loans,
they're not going to come with a lot of the same type of protections
that you might get from a federal.
If you were to look at it from a kind of a decision tree,
you go federal first.
And if that loan isn't enough to actually cover
all of your tuition and expenses,
then the next thing you do is actually look at private loans.
But once again, private is going to generally have a higher interest rate
that you're going to owe.
