No credit requirements. Most federal student loans don’t require a credit check. Direct PLUS Loans, which are made to parents and graduate students, check your credit history for negative items but not your credit score. Even if you haven’t established a credit history, you can still borrow a federal loan.
Fixed interest rate. The biggest benefit of federal student loans is that they offer fixed interest rates. This means that your interest rate will never change, no matter how long it takes you to repay your loan.
Flexible repayment options. If you’re having trouble making your monthly payments, you can choose to extend your repayment period or lower your monthly payment by switching to an income-driven repayment plan. Those plans cap your loan payments at no more than 20% of your discretionary income.
Loan forgiveness programs. Several federal student loan forgiveness programs are available, which can help you get rid of your student debt if you work in certain careers or meet other requirements. In contrast, few lenders offer private student loan forgiveness. Read more about how to apply for student loan forgiveness.
Payment suspension. If you can’t make your monthly payments, you can temporarily stop making them without damaging your credit score using a deferment or forbearance.
Options to recover from default. You default on federal student loans after you miss payments for nine months (270 days). Even after that point, federal borrowers have options to get back on track using consolidation or loan rehabilitation.
In contrast, if you miss a payment on a private student loan, the loan can default. The lender can choose to “charge off” the loan after 120 days. That means the lender will no longer try to collect money from you, and the loan will be sold to a collection agency. The only ways to fix the default at that point are to pay the balance in full or negotiate a settlement. Read more about how to recover from private student loan default.