fed

Federal vs. Private Student Loan Terms: What’s the Difference?

You’ve enrolled in a course, made campus visits, met with the teachers, and even did some pre-work in preparation for your class. You’re on the way to your dream career. But first, there’s one big question you have to answer: how are you going to pay for this? If you’re like millions of Americans, the answer is student loans. (And, according to a recent LendEDU survey, 36% of millennials currently carry student loan debt.) These loans come in two main types: federal and private. Below, we’ve outlined and explained the key differences between a federal vs. private student loan.

Federal Student Loans

Federal student loans are, you guessed it, loans provided by the federal government. And because the funding is provided by the government, loan terms are standardized throughout the US. Depending on the type of federal loan you receive, you’ll have an interest rate between 3.73% and 6.28%*. Federal loans are not allocated based on credit history, so you don’t need to worry about having good credit when filling out your FAFSA form.

Federal loans are not an option for everyone though. Many institutions — such as vocational schools and coding bootcamps — are not eligible for federal financial aid.

Private student loans

Private student loans are provided by private companies and may have higher interest rates. Since the rates are set by each company, loan terms vary between them. They may have fixed or variable interest rates, and payments may be deferred while you are in school or begin immediately. Underwriting is also stricter for private companies. Many companies will look at credit history when considering an application, and when they do each company will place varying weight on the factors — like credit score, history of making payments on time, and the debt-to-income ratio — that they look at. At Climb, we also consider your potential future income when deciding whether to make a loan. Because of our school underwriting process, we’re able to offer more students better rates.

Another key difference in federal vs. private student loans is that, since they’re not using government funding, private companies are able to step in and provide financing where federal loans are not available. This is why all of us at Climb are so proud of the fact that, to date, thousands of students have been able to attend coding bootcamps and vocational schools — schools which they otherwise may not have been able to attend due to the absence of federal or other financing alternatives.

When applying for financing, it’s always in your best interest to know what options are available — and, whether your best option ends up being a private or a federal loan, to understand how which type of lender you’re using influences your loan. Because, as we can see from the LendEDU survey, for many of us this will be a decision that lasts!

Curious what loan terms you can get with Climb Credit? Submit an application today to see your offer with no impact on your credit score!**

*These numbers reflect the federal interest rates for loans disbursed on or after July 1, 2021, and before July 1, 2022.

**Climb performs a soft credit pull upon application submission, which does not impact credit score. When a loan is funded, a hard credit pull is performed, which may impact credit score.

2 thoughts on “Federal vs. Private Student Loan Terms: What’s the Difference?

  1. I’ve applied and.been approved. Im reading this now and would like to know when you say Federal do you mean FAFSA because I wanted to apply for this however I needed the school ID number?
    Please help me and the AAPC is requiring the $499.00 down payment ? She said you over qualified me and the loans has been reduced?
    Is this typical or am I being scammed I have never done this before or at least in a LONG TIME ago.
    Thank you for your answer.
    Adda Harria

    1. Hi Adda, thanks for reaching out! Yes, federal loans do refer to FAFSA.

      And to confirm your loan amount, please feel free to reach out to our Student Success Team, who will be able to provide you with all the information you need — you can give them a call at 888-510-0533, email them at hello@climbcredit.com, or live chat with a Climb rep at climbcredit.com!

Leave a Reply

Your email address will not be published.Required fields are marked *

Subscribe to get more info sent straight to your inbox!

What to Expect: Realistic Outcomes

Climb’s Comprehensive Access Solution can offer a strategic balance of increased enrollments and upfront cashflows compared to traditional lenders. While no financing solution guarantees 100% collection, our data-driven approach maximizes both upfront cash and long-term repayment rates.

Typical Partner Results:

  • 15-30% of students qualify for Climb Loans with upfront tuition delivered to the school shortly after course start
  • 45-60% of students qualify for 0% APR* payment plans
  • Enrollment increases of 20%+ reported by partner schools**

**Results vary by school and student demographics. This represents performance reported by individual school partners and should not be considered a guarantee of your specific outcomes.

The bottom line: CAS is designed to maximize your net tuition recovery while eliminating the administrative headaches of student financing.

Maximizing Your Results

Pro Tip: Schools that require student deposits and set up automatic payments during enrollment see significantly better repayment performance across all financing options. These simple steps can meaningfully improve your outcomes.

FAQs

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

Students are placed into funding brackets (Elite, Standard, Enhanced) based on our AI assessment. Higher-credit students generate higher upfront payments to your school, while students with limited credit are seamlessly directed to our 0% Payment Plan.

These brackets are established using data from over $1 billion in career training loan originations and may be adjusted periodically based on updated repayment trends.

Important note: Regardless of which bracket a student falls into, they are considered fully paid by your school once funded. The student’s repayment obligation exists exclusively between Climb and the student.

Elite Access not available for Computer Science programs. Upfront percentages vary by industry and loan terms.

Once Climb disburses upfront funding for a student loan, that student is considered fully paid by your school. You will not receive any additional payments for that student—the single upfront payment is complete and final.

From that point forward, the student’s repayment obligation exists exclusively between Climb and the student. Your school has zero liability if the student defaults, and you keep the full upfront payment regardless of the student’s future payment performance.

They’re automatically offered our 0% Interest Payment Plan, ensuring no student is turned away while maintaining steady monthly cash flow for your school.

Higher-credit students generate larger upfront payments (75-100% of tuition), while students with limited credit use our 0% APR* Payment Plan for consistent monthly revenue. Both options are risk-free for your school

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Typically, within 5-10 business days after your partnership agreement is signed.

Comprehensive onboarding webinar, continuous partner support via AI-assisted chat and live email—and real-time borrower assistance with our live-chat-available student success team.

No. Climb fully manages the administrative responsibilities—your team simply monitors your school’s performance via our intuitive School Portal.

Your school is fully protected either way. For Climb Loans, you keep the entire upfront payment with zero liability. For Payment Plans, you only receive what students actually pay, with no risk to your school.