Direct Unsubsidized Loan vs Private Loan - worth taking small fed loan with similar interest rate?

always take the fed loans first!!!

There are several compelling reasons to take the Direct Unsubsidized Loan even if it's small: 1. Federal protections - Direct Loans offer deferment, forbearance, and various forgiveness options that private loans don't 2. Fixed interest rate - Federal rates are fixed for the life of the loan while many private loans have variable rates that could increase 3. No credit check or cosigner needed for federal loans 4. Income-driven repayment options (even if she doesn't think she'll need them now, circumstances change) 5. No prepayment penalties I always recommend maxing out federal loans before turning to private options. Even with the administrative hassle of managing two loans, the protections are worth it. If her financial situation changes unexpectedly after graduation, she'll have more flexibility with the federal portion.

I made the mistake of going all private loans because the rate was SLIGHTLY better than my Direct loans and I've regretted it ever since!!!! When COVID hit and federal loans were paused, mine still accrued interest. Then when Biden did that $10k forgiveness thing I couldn't get it because I had refinanced everything privately to "simplify" my payments. TAKE THE FEDERAL EVEN IF ITS SMALL trust me!!!

Speaking from extensive experience advising students on financial aid, your daughter should absolutely accept the Direct Unsubsidized Loan first, then use the private loan to cover the remainder. Here's why: - Federal loans currently have a 6-month grace period after graduation - Federal loans have death and disability discharge provisions (private loans typically don't) - No prepayment penalties on federal loans (some private loans do) - Potential eligibility for Public Service Loan Forgiveness if she works in qualifying employment - Federal loans can be consolidated later if desired The administrative aspect of managing two loans is minimal compared to the benefits. Most loan servicers offer auto-pay options, and she'll simply have two payments instead of one. The protections far outweigh this minor inconvenience.

This might be a dumb question but can your daughter even decline just part of her financial aid package? When I got mine, I thought it was all or nothing. Maybe check with the financial aid office if she can pick and choose?

I couldn't get ahold of anyone at Federal Student Aid when I was trying to figure out a similar situation last year. Kept getting disconnected or stuck on hold for hours. Finally discovered Claimyr (claimyr.com) which got me through to a live agent in about 10 minutes. They have a video demo at https://youtu.be/TbC8dZQWYNQ that shows how it works. The agent I spoke with walked me through all the differences between federal and private loans, which really helped me make my decision. Might be worth checking out if you want to speak directly with someone about the specifics of your daughter's situation.

Also consider that if she doesn't take the full federal loan amount offered, it might affect what she gets offered NEXT year!!!! I don't know all the details but when my brother didn't accept his full fed loans one year, they offered him less the next year assuming he didn't need it. Something to think about!!

my roomate had both types of loans and said the biggest benefit was when she lost her job after graduation, she could put her federal loan on hold but had to keep paying the private one even tho she had no income. thats why i took all the federal loans i could get even tho some of my private options had slightly better rates

One final point to consider: if your daughter takes the federal loan first and then the private loan for the remainder, she'll end up with approximately 25% of her debt having federal protections. That's significantly better than 0%. Even this partial protection could be valuable in the future, especially since we can't predict economic conditions or personal circumstances years down the road.