Get Four
Free Issues

Subscribe to BW
Customer Service


Full Table of Contents
 Cover Story
Asian Cover Story
BusinessWeek/Golf Digest
Up Front
Readers Report
Corrections & Clarifications
Voices of Innovation
Technology & You
Media Centric
The Barker Portfolio



Business Outlook
News: Analysis & Commentary
In Biz This Week
Washington Outlook
Asian Business
European Business
Global Outlook
Science & Technology
Media
Manufacturing
Special Report
Finance
Information Technology
Housing
Design
Management
The Corporation
Marketing
Inside Wall Street
Figures of the Week
Ideas -- Books
Ideas -- Viewpoint
Ideas -- Outside Shot


INTERNATIONAL EDITIONS
International -- Readers Report
International -- Corrections & Clarifications
International -- Finance
International -- Global Figures of the Week


NOVEMBER 14, 2005
 
  STORY TOOLS
Printer-Friendly Version
E-Mail This Story

  RELATED ITEMS
Graphic: Credit Cards

Graphic: Paige Nichols

Graphic: William R. Love

Graphic: Cristina García Gamboa And Manuel Gamboa

Graphic: Dreams Put On Hold

Graphic: Schooled In Debt

Graphic: Ed. 101

Graphic: Income

Online Extra: Personal Finance for Freshmen

Online Extra: The Private-Loan Dilemma

Online Extra: Draut on Debt
SPECIAL REPORT/Online Extra
Back to Main Story

Federal vs. Private Loans
At a glance, here's how federal and private student loans differ

Although some federal student options are specifically tailored to parents (PLUS loans) and extremely low-income students (Perkins loans), the go-to federal loan option for most students is the Stafford loan. Students in all income brackets are eligible, but those who are lower-income can qualify for a subsidized option in which the government pays the interest while the student is in school. Most major education lenders, such as leading education lender Sallie Mae, offer students both private and federally guaranteed loan options.


Here's a breakdown of the differences between the federally guaranteed subsidized and unsubsidized Stafford loans vs. the private student loans offered at Sallie Mae.



Federal Stafford LoanPrivate Loan
  ELIGIBILITY
Available on both need and non-need basis (Subsidized and Unsubsidized Stafford Loans). A credit check is not required.

Borrower must complete the Free Application for Federal Student Aid

You must be a U.S. citizen or permanent resident, full- or half-time undergraduate or graduate student.

Based on credit criteria established by lender. Credit qualification criteria vary by whether the loan is backed by a co-signer.

Individual must be:
Enrolled at least half-time at a 4- or 5-year college or university (approved by the U.S Education Dept.).

Age of majority in your permanent state of resident (in most states it's 18).

Working on your undergraduate or graduate degree.

No income requirement. Co-signers do not have to provide proof of income

Approval rate of more than 80%
  INTEREST RATE
Set by federal formula

Noncredit based


Variable interest rate, reset annually, capped at 8.25%

Currently 4.7% in school, in deferment status, or in grace period; 5.3% in repayment


Set by lender



Credit-based

Interest rates vary based on credit history. Lowest pricing is available when both the student borrower and a co-signer are credit-approved.

Variable interest rate, reset monthly

Based on the prime rate and will change monthly if the prime changes. Starts as low as prime -0.25% and goes to prime + 6%.

 FEES
3% Origination fee
1% Guarantee fee 		A repayment fee (3%) may apply to some credit tiers



 MAXIMUM LOAN AMOUNT
Loan limits set by Congress
Year 1: $2,625
Year 2: $3,500
Years 3 & 4: $5,500
Graduate $8,500
 Individuals may borrow up to the cost of attendance less any other financial aid received. Borrower's school must certify the requested loan amount.

Maximum aggregate loan limit (including all student loan debt, federal and private) is $100,000 without a co-signer. There is no aggregate loan limit when the individual borrowers with a co-signer.



 REPAYMENT
Borrower doesn't have to make payments while enrolled more than half-time.

Borrower has six-month grace period after leaving school and before payments begin.

Standard 10-year repayment term

Variety of repayment plans, including extended repayment of up to 25 years for those with $30,000 in student loan debt.

Federal loan consolidation is an option. 		Borrower doesn't have to make payments while enrolled more than half-time.

Borrower has six-month grace period after leaving school and before payments begin.

Standard repayment term is 15 years.

Variety of repayment plans, including opportunity to extend repayment term as follows:

If the aggregate student loan balance is $20,000 to $40,000, individual can extend repayment term up to 20 years; $40,000 and higher, individual can extend repayment term up to 25 years.

Loans not eligible for federal loan consolidation. Combined billing available for convenience of making single payment.
 
Private Loan based on Sallie Mae's Signature Student Loan, the company's most common private education loan.

DATA: Sallie Mae



 BW MALL   SPONSORED LINKS
    Buy a link now!

    Get BusinessWeek directly on your desktop with our RSS feeds.XML

    Add BusinessWeek news to your Web site with our headline feed.

    Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

    To subscribe online to BusinessWeek magazine, please click here.

    Learn more, go to the BusinessWeekOnline home page
    Back to Top


      MARKET INFO
    DJIA 0 0.00
    S&P 500 0 0.00
    Nasdaq 0 0.00

    Portfolio Service Update

    Stock Lookup

    Enter name or ticker



    Copyright 2005, Bloomberg L.P.
    Terms of Use | Privacy Notice

    Media Kit | Special Sections | MarketPlace | Knowledge Centers
    Bloomberg L.P.