Why You Should Stick With Federal Student Loans

Private student loans typically don't offer the same protections as federal student loans.

Editor's note: This article originally appeared in the November 2014 issue of Kiplinger's Personal Finance.

Private student loans, offered by banks and other lenders, have fixed rates as low as 4% for borrowers with good credit; variable rates on some private loans are as low as 2.25%. But private loans lack many of the protections that come with federal loans—one big reason your student should stick with federal loans. For instance, in most cases, a student won’t qualify for a private loan unless the parent cosigns, says Kalman Chany, author of Paying for College Without Going Broke (Princeton Review). And once you’ve cosigned for a loan, you’re on the hook for payments if your child defaults. Plus, private loans aren’t necessarily discharged if the borrower dies or is disabled. If you cosigned the note, you’ll be the one repaying it.

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Kaitlin Pitsker
Associate Editor, Kiplinger's Personal Finance
Pitsker joined Kiplinger in the summer of 2012. Previously, she interned at the Post-Standard newspaper in Syracuse, N.Y., and with Chronogram magazine in Kingston, N.Y. She holds a BS in magazine journalism from Syracuse University's S.I. Newhouse School of Public Communications.