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Federal Direct PLUS vs. Private Loans – Know the Difference

If you’ve exhausted scholarships, grants, and Federal Direct Loans to cover college costs and are still left with funding gaps, you might be considering Federal Direct PLUS or private student loans. There are some key differences between the two loan types that are important to understand – we’ve outlined the top three below.

Who is the lender for each type of loan?

A lender is the entity who funds your loan – in other words, from whom you are borrowing and who you will need to repay.

  • Federal Direct PLUS loans are issued by the U.S. government – the government utilizes various servicers to handle billing and other aspects of the loans.
  • Private student loans are issued by credit unions, banks, and other finance companies, who may service the loans themselves or use another party for servicing.

Who is the borrower? (Whose name is on the loan?)

When you take out any type of loan, you are borrowing money that will have to be repaid. The borrower is the person legally responsible for repaying the loan.

  • PLUS loans are issued to the parent of an undergraduate student (or to a graduate/professional student).
  • Private student loans are issued in the student’s name but may require a co-borrower such as a parent to qualify or receive a lower interest rate.

What are the repayment terms?

Once your loan enters repayment (usually once you have graduated or otherwise separated from school), you will have a certain amount of time to repay the loan in monthly installments.

  • Federal PLUS loans are eligible for the following repayment plans:
    • Standard Repayment Plan (10 years)
    • Graduated Repayment Plan (10 years)
    • Extended Repayment Plan (25 years but must meet certain criteria)
  • Private loan terms vary by lender but often have options for longer repayment terms. For example, a Student Choice line of credit has a repayment term of 20 or 25 years based on loan balance.

You can also consult studentaid.gov to learn more about federal student loans.

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*APR = Annual Percentage Rate

In order to apply for a loan, you must first pick an individual credit union from which you wish to borrow. You can apply for the loan without being a member of the credit union you select, but you will need to become a member of that credit union in order to receive a funded loan. Therefore, it's important that you select a credit union that you will be eligible to join. Credit union membership requirements can include where you live, work, or attend school. Results are based on membership criteria provided by individual credit unions and do not imply a guarantee regarding accuracy or eligibility to join the listed credit union(s).

Calculations are based on the lowest possible rate and available repayment terms per lender. Rate estimates are based on credit information entered by the user and will not impact your credit. During the application process, a hard credit inquiry will be performed to provide exact rate information. Repayment calculations assume immediate full repayment. View the full range of rates and terms by visiting your credit union's website using links listed for each credit union above.

Using the free student loan refinance calculator does not constitute an offer to receive a loan and will not solicit a loan offer. Any payments and savings will depend on the actual amounts for which you are approved, should you choose to apply. This calculator is provided for educational purposes only and should not be relied upon as financial advice. Always consult your credit union or financial advisor when making your decision.

IMPORTANT NOTICE for refinance borrowers: By refinancing federal student loans, you may lose certain borrower benefits from your original loans. These may include interest rate discounts, principal rebates, or some cancellation benefits that can significantly reduce the cost of repaying your loans. Please review this important disclosure for more information.

Your actual rate within the range stated will be disclosed upon approval. Student borrowers may apply with a creditworthy cosigner which may result in a better chance of approval and/or interest rate.