With the rising cost of college, many families are left wondering how to fill the gap between financial aid and what they can afford out of pocket.
One common solution: student loans.
But can you use both federal and private student loans to pay for college? The answer is yes—and in some cases, it’s the smartest financial strategy.
In this article, we’ll break down how these two types of loans differ, how they can be used together, and when it makes sense to borrow from one or both.
We’ll also explain how College Benefits Research Group (CBRG) helps families limit their reliance on loans by maximizing free and need-based aid.
Understanding the Two Main Types of Student Loans
Student loans fall into two broad categories: federal and private. Each comes with different interest rates, repayment terms, borrower protections, and eligibility criteria.
Federal Student Loans:
Federal student loans are typically the first borrowing option families should consider. These loans are backed by the government and come with a range of borrower protections.
- Funded by the U.S. Department of Education
- Include Direct Subsidized and Unsubsidized Loans, PLUS Loans, and Perkins Loans (historically)
- Must be applied for through the FAFSA
- Offer borrower protections like deferment, forbearance, income-driven repayment, and forgiveness options
Private Student Loans:
Private student loans serve as a secondary borrowing option for students who need to fill the gap after federal aid. These loans come from non-government lenders and require careful consideration.
- Offered by private lenders such as banks, credit unions, or state-based lenders
- Credit-based (most students require a co-signer)
- Terms and rates vary significantly by lender
- No federal protections or forgiveness options
Understanding the fundamental differences helps families make informed borrowing decisions.
Yes, You Can Get Both—Here’s How It Works
Students are allowed to borrow both federal and private student loans in the same academic year, as long as the total does not exceed the school’s cost of attendance minus other financial aid received.
Here’s how it typically works:
- The student completes the FAFSA and receives a financial aid package that may include grants, scholarships, and federal loans.
- If there’s still a balance after accepting all federal aid, families may turn to private lenders to cover the remaining costs.
This is common at high-cost private institutions, for out-of-state tuition, or when Parent PLUS Loan eligibility is denied. Some international or graduate students also rely more heavily on private options.
Advantages of Federal Student Loans
Federal loans should always be the first line of borrowing for students and parents due to their flexibility and protections.
Key benefits include:
- Subsidized Loans don’t accrue interest while the student is in school (based on financial need)
- Unsubsidized Loans accrue interest but offer low fixed rates and flexible repayment terms
- Access to income-driven repayment and Public Service Loan Forgiveness (PSLF)
- Generous deferment and forbearance options for temporary hardship
- Available to most students regardless of credit history
The fixed interest rates and repayment safety net make federal loans less risky than private loans.
When Private Loans Make Sense
Private loans are typically used when:
- Federal loans and aid don’t fully cover the cost of attendance
- The student is attending a high-cost institution with limited need-based aid
- The family has good credit and can qualify for low private interest rates
Factors to consider with private loans:
- Interest rates may be fixed or variable
- Co-signer is usually required (often a parent)
- Some lenders offer repayment flexibility, but terms vary widely
Private loans can be useful tools, but families should exhaust all federal options first and shop carefully across lenders.
Risks and Downsides of Relying on Private Loans
While private loans can help bridge funding gaps, they come with added risks:
- Higher interest rates and fewer borrower protections
- No forgiveness options
- Limited deferment/forbearance for financial hardship
- Co-signer liability, including damage to their credit if payments are missed
Missing payments or defaulting on a private loan can have long-term financial consequences for both students and co-signers. Federal loans, by contrast, offer multiple paths to relief.
Strategic Use of Both Loan Types
Many families use a hybrid approach: starting with federal loans and turning to private loans only if absolutely necessary.
Here’s how to use both types wisely:
- Accept all grants and scholarships first
- Max out federal subsidized loans (lowest cost)
- Use unsubsidized federal loans next
- Only borrow private loans after federal limits are reached
- Shop multiple private lenders for the best rates and repayment options
CBRG helps families map out a borrowing plan based on long-term financial outlook, expected income after graduation, and realistic debt levels.
How CBRG Helps Families Reduce Loan Reliance
The best student loan is one you don’t have to take. That’s why CBRG focuses on:
- FAFSA strategy to qualify for the most federal aid
- CSS Profile optimization for private college aid
- Merit aid targeting through strategic college selection
- Appeals for more aid when financial circumstances change
- Providing full visibility into net price comparisons across schools
In one verified case, a CBRG client from Essex County was preparing to take out $28,000 in private loans.
After our team identified a misclassification in their FAFSA and submitted an appeal with supporting documentation, they were awarded additional institutional grants—reducing their loan need by over $16,000.
CBRG’s expert guidance helps families borrow less and save more.
FAQs: Federal and Private Student Loans
Yes. As long as your total aid doesn’t exceed your school’s cost of attendance, you can use both types.
Dependent undergraduate students can borrow between $5,500 and $7,500 per year, depending on grade level. Independent students may borrow more.
No. Private loans are not eligible for federal forgiveness programs like PSLF or income-driven repayment forgiveness.
Most lenders prefer a co-signer with a credit score of 670 or higher. Students rarely qualify on their own.
Yes. Parents can apply for PLUS Loans through the federal government or co-sign a private loan with their student.
Private loan default can damage your credit and lead to collections. There are fewer repayment protections compared to federal loans.
Start with the FAFSA for federal loans. For private loans, apply directly through your chosen lender, often with a co-signer.
Why Families Should Plan Their Loan Strategy Carefully
Student loans can be a useful tool—but without careful planning, they can become a long-term burden.
Understanding how to leverage both federal and private loans wisely is essential for minimizing debt and protecting your financial future.
CBRG works with families to build a comprehensive college funding plan that prioritizes grants, scholarships, and affordability first—so loans are a last resort, not the default.
If you’re unsure how to cover your college costs, we can help you chart the best course forward—before borrowing becomes a necessity.