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Federal versus private student loans, in plain words
The logo on the bill matters. Federal and private student loans are different products with different exits, even when the monthly payment looks similar.
Stay current on every required payment. Federal loans can use income-driven repayment and, in named programs, forgiveness. Refinancing a federal loan into a private loan usually drops those options for good.
Two products, not one pile
Federal loans are made under Department of Education rules. They can offer income-driven repayment, deferment, forbearance, and discharge in death or total permanent disability. Private loans are bank or credit-union contracts. Protections are whatever that contract says.
Subsidized federal loans do not accrue interest while you are in school at least half time. Unsubsidized federal loans do. Private loans follow their own interest rules from day one.
Income-driven repayment is a formula, not a vibe
IDR plans cap the monthly payment using income and family size. The leftover can be forgiven after a set number of years, and that leftover can be taxable. The Department of Education publishes the current plan names. This lesson does not, because names change.
Public Service Loan Forgiveness is a separate track: 120 qualifying payments while working full-time for a qualifying employer. The employer and the payment all have to qualify. A private refinance ends that path.
The refinance door only swings one way
A lower private rate can cut interest. It also usually ends federal income-driven plans, forgiveness tracks, and the federal death and disability discharge. That is a trade, not a coupon.
Capitalization is unpaid interest added to principal. After a pause, the balance the rate applies to is larger. The first bill after a grace period is often a shock for that reason, not because the loan 'got worse overnight.'
Questions people ask
Should I refinance federal loans?
Only after you know which federal options you are giving up. A lower rate is not automatically cheaper if you needed those options.
Does this page quote a percent of income?
No. The budget you actually have is the test. Named IDR formulas live on StudentAid.gov.
What about a parent PLUS loan?
It is a federal loan in the parent's name, with different repayment rules than a student Direct Loan. The promissory note is the source.
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