Some student loans are considered "private," as distinguished from "federal" student loans, which are offered under a government program. Although federal loans dominate (76 percent of total education loans), private loans are growing faster: from 6 percent to 24 percent of the total in the last 10 years.
Sallie Mae, the leading lender to college students, has announced it will originate fewer federal loans. As a result, Sallie Mae (and probably other major lenders) will be devoting more efforts to making private loans. As a result, more families may be taking out private loans. When name-brand lenders are promoting private loans, students and parents may assume that’s the way to borrow for college.
In reality, though, students who need to borrow should start with federal loans. Interest rates are modest and there may be an opportunity to defer payments. To get those loans, parents must fill out the Free Application for Federal Student Aid (FAFSA).
