Federal loans are the largest source of education loans around. They have very attractive terms when compared to most other borrowing options — such as lower interest rates, federal subsidized interest possibilities, options to postpone payments, longer repayment terms, easier credit requirements, etc. You will need to complete the Free Application for Federal Student Aid (FAFSA) before you can apply for Federal students loans.

You should always plan to look for federal loan options before investigating private loan sources, because these loans are sometimes more difficult to obtain and can often end up being very costly to you in the end. Private loans are designed to supplement federal loan programs and are available from schools, banks and education loan organizations. Private loans are also known as alternative loans and the terms often vary considerably based on the lender and borrower credit histories. Here are some important things to remember about the differences between federal and private education loans:

• Private loans may require a borrower to have reasonably good credit, as well as have a co-borrower in most circumstances.
• Interest rates and fees are determined by the lender and usually depend on the borrower's or co-borrower's credit score, unlike Federal Stafford Loans which have standard rates and fees.
• Private loan programs may or may not offer deferment options and forbearance of loan payments in certain circumstances.
• Private loan programs may offer borrower benefits. These could be in the form of interest rate discounts or rebates to encourage students to make timely payments, make automated payments, or to agree to enroll in Web-based billing and servicing. Remember that these benefits may differ from your Stafford loan borrower benefits even if you are using the same bank for both loans.
• You should be conservative and borrow wisely.

Remember: Any education loan has to be repaid — even if you don't finish school, are unhappy with the education you received or are unable to find a job, or you're making less money than you planned. So borrow wisely now, because the amount of money you borrow now will have long-term effects that can influence your lifestyle!