Federal vs. Private Loans
Federal loans offer income-driven repayment, deferment, forbearance, and forgiveness options. Private loans may have lower rates but lack these protections.
Refinancing Risk
Refinancing federal loans into private loans permanently forfeits IDR, PSLF, and federal protections. Compare carefully before refinancing.
Capitalized Interest
Interest that accrues during school or deferment gets capitalized (added to principal) when repayment begins, increasing your effective balance.
Break-Even Point
The month when a lower monthly payment loan has saved you enough cash vs. a higher-payment loan to offset its higher total cost.
How to Compare Student Loan Offers
What actually determines the cheaper loan — beyond the sticker-rate you see first
Rate isn't the whole story: APR, fees, and term
The interest rate is only one input into total cost. APR (Annual Percentage Rate) is a more complete number for private loans because it can fold in origination fees and other loan costs — always ask a private lender for the APR, not just the headline rate, when comparing offers. Federal loans do carry an origination fee (deducted from your disbursement, not added to your balance) that's set by statute and doesn't vary by lender since there's only one lender: the federal government. A longer repayment term lowers your monthly payment but almost always increases total interest paid — the comparison tool above shows this trade-off directly in the "Total Interest" and "Total Paid" columns.
Federal vs. private: what you give up, not just what you save
Federal loans carry protections private loans generally don't: income-driven repayment plans that cap payments as a share of income, deferment and forbearance if you lose your job or return to school, discharge in the event of death or total disability, and eligibility for Public Service Loan Forgiveness. A private loan might offer a lower rate today, but that rate is fixed against your circumstances at signing — it won't flex if your income drops, you're laid off, or you want to pursue public-service work later. Weigh a lower private rate against the value of those protections, not just the monthly payment difference.
A practical comparison checklist
- Confirm the rate type. Is each offer fixed or variable? A variable rate can rise over a 10-20 year term — model the private offer at a higher stressed rate (add 2-3 points) before assuming it beats a fixed federal rate.
- Ask for the APR, not just the rate, on any private offer — origination fees and other costs can meaningfully change the real cost.
- Check the repayment term. A shorter term with a higher monthly payment usually has a lower total cost — the "Total Paid" row above shows this for each loan you enter.
- List what protections you'd give up. If any offer is a refinance of federal debt, write down every protection you'd lose (IDR, PSLF, deferment) before comparing dollars.
- Confirm capitalized interest treatment. Ask whether unpaid interest during school or deferment gets added to principal, and enter that amount in the "Capitalized Interest" field for an accurate comparison.
- Look at the break-even point (below) — not just which loan has the lower monthly payment today.
Worked example: lower payment vs. lower total cost
| Loan A — $20,000 at 6.53%, 10-year term | $227/mo |
| Loan B — $20,000 at 7.50%, 15-year term | $185/mo |
| Loan A total interest over its term | $7,288 |
| Loan B total interest over its term | $13,372 |
| Loan B's lower monthly payment costs, in extra interest | +$6,084 |
Loan B looks more affordable month to month, but Loan A is the cheaper loan overall. This is exactly what the "Break-Even Analysis" section above calculates for the loans you enter — it tells you how many months you'd need to bank the monthly savings from the lower-payment loan before it actually saves you money.