Federal vs private, interest rates, repayment plans, and strategies to pay them off faster. The honest guide to borrowing responsibly for college.
Federal loans come from the government and are almost always better:
Interest on student loans accrues daily. The formula: (Principal Balance × Interest Rate) ÷ 365 = Daily Interest.
Federal loans offer several repayment options:
Key takeaway: Student loans aren't the end of the world, but ignoring them is. Understand your loan types, pick the right repayment plan, and make extra payments when you can. The interest savings are enormous.
Questions people ask
Should I pay off loans or invest?
If your loan interest rate is above 6-7%, prioritize paying it off. Below that, investing may earn more over time. Always pay minimums regardless.
What happens if I can't make payments?
Contact your loan servicer immediately. Federal loans offer deferment, forbearance, and income-driven plans. Never just stop paying — it destroys your credit.
Should I refinance my student loans?
Maybe. If you have good credit and stable income, refinancing can lower your rate. But refinancing federal loans to private means losing access to forgiveness programs and IDR plans.
Is PSLF real?
Yes. Public Service Loan Forgiveness forgives remaining federal loans after 120 qualifying payments while working for a government or nonprofit employer. Stricter rules were loosened in 2022.
What if I have to drop out?
Your loans become due around 6 months later. Contact your servicer immediately to explore deferment, forbearance, or IDR options.
Can student loans be discharged in bankruptcy?
Historically very difficult, but recent court rulings have made it slightly easier in extreme hardship cases. Still, plan to pay them back.