Federal Insured Student Loans

Written by Nicole Madison
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Federal insured student loans have many advantages over private student loans. Often interest on federal student loans is tax deductible. In addition, you can often defer repaying a federal loan if you return to school and you may even be able to have your loan balance forgiven if you make certain career choices after graduation. There are no pre-payment fees involved with federal student loans and it is free to apply. You do not have all of these benefits with private educational loans.

Federal Insured Student Loans Versus Private Loans

Despite the lack of the advantages you get with federal insured loans, private loans can come in handy when financial aid fails to cover enough of the student's educational expenses. Private loans can be secured and unsecured, and are based primarily on credit. They can be used to cover education related expenses including tuition, room and board, off-campus housing, textbooks, travel costs, and more. Private loan interest is, in general, higher than the interest on federal insured student loans. Whenever possible, use private loans as a last resort to fill in educational expense gaps.

Private loans cannot be consolidated with federal student loans under federal consolidation loan programs. Although many private lenders will consolidate your federal student loans with your private loans, you stand to loose far too many benefits to make this an advisable way to consolidate. Instead, it is wise to consolidate your federal insured student loans first, and then separately consolidate your private loans.


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