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The top 10 benefits of federal student loans

Federal student loans offer some significant benefits over private loans in the process of paying for college.

Words like 鈥渄eferment,鈥� 鈥渃onsolidation鈥� and 鈥渋ncome-based repayment鈥� aren鈥檛 part of a typical high school senior鈥檚 vocabulary. But understanding how they鈥檒l eventually apply to you could make聽you聽feel much more secure as you repay student loans in your 20s.

These terms describe benefits that are exclusive to federal loans 鈥� those issued by the government 鈥� that make聽repaying them聽easier and cheaper than repaying private loans. When you鈥檙e looking for ways to pay for college, federal loans should be your next choice after grants and scholarships.

Here are 10 reasons why.

1. You can get federal loans without a credit history.

You can only take out a private loan (one from a financial institution such as a bank or credit union) independently if you have a credit history 鈥� for example, if you have credit cards or a car loan in your name.聽If you鈥檝e paid these bills on time and in full in the past, you鈥檒l have a good聽聽and you鈥檒l be offered more聽private loan options and lower interest rates. However, many financial aid applicants will聽have short credit histories and low credit scores, if they have scores at all. Federal loans, on the other hand, are available to any enrolled undergraduate with financial need.

2. You can get federal loans without a co-signer.

High school seniors and college students without long credit histories can still qualify for private loans if they have a co-signer 鈥� usually a parent or grandparent who agrees to聽pay the聽loan balance聽if the student can鈥檛. It鈥檚 hard to聽聽from a private loan later on, though. Since federal loans aren鈥檛 credit-based, they don鈥檛 require a co-signer, meaning your family members won鈥檛 have to be concerned about taking on the repayment responsibility.

3. Federal loans offer lower interest rates than private loans.

Undergraduates who take out federal loans during the 2015-16 school year will聽pay 4.29% in interest on those balances. Private loan interest rates can be twice or three times as much, depending on your credit score or that of your co-signer.

Additionally, rates for federal loans are fixed, meaning they鈥檒l remain the same during your entire loan term.聽Private loans frequently offer variable rates, which increase when the Federal Reserve聽聽鈥� as it did on Dec. 16, 2015, for the first time since 2007.

Keep in mind that if your interest rate is too high, whether you have a federal or private loan,聽,聽as long as you鈥檝e built up your credit聽and earn a steady paycheck.

4. You can postpone federal loan payments for up to three years.

If you can鈥檛 afford your payments temporarily, federal loan programs聽offer聽two options.聽聽allows you to postpone or lower your payments due to economic hardship for a total of three years.聽聽lets you pause payments for up to a year at a time. Private student loans have significantly less generous options. Some lenders will lower your interest rate or let you pay only the interest for a period of time, but not all.

5. The government pays the interest on deferred subsidized federal loans.

Students who need greater financial assistance to pay for school qualify for federal subsidized loans. The government pays the interest on subsidized loans when they鈥檙e in deferment, both while you鈥檙e in school and if you take a break from payments. Private loans don鈥檛 have this benefit. Interest accumulates on private loans 鈥� and on unsubsidized federal loans 鈥� as soon as they鈥檙e paid to you.

6. You can choose from seven federal student loan repayment plans.

The repayment period on your private loans is聽often difficult to negotiate. But if you have聽federal loans, you can choose from seven聽聽with different monthly payments and loan terms. You can even tie your bill to your income.

The government established an income-driven repayment plan called聽聽in late 2015 that lets all federal loan borrowers put聽a maximum of 10% of their incomes toward repayment each month. If you have only undergraduate loans, your balance will be forgiven after 20 years, or 25 if you have graduate school loans. No such option exists for private loans.

7. Federal loans offer聽forgiveness opportunities.

Private loans don鈥檛 offer any forgiveness opportunities: You鈥檙e responsible for repaying the full balance. But federal loans can be dissolved if you participate in an income-driven repayment plan or work at a nonprofit or for the government. The Public Service Loan Forgiveness program forgives federal loans after 10 years. Perkins Loan cancellation forgives this type of loan after an even shorter聽time.

8. It takes longer for federal loans to go into default.

Some private loans go into default the day after you miss a payment. While private lenders don鈥檛 have as much power as the federal government does to recover聽the money you owe, missing a payment will severely affect your credit. That will make it harder for you to take out other loans or even get an apartment in the future.

Federal loans give you more time to get your payments on track if you fall behind. Your loans aren鈥檛 considered 鈥渄elinquent鈥� 鈥� and you won鈥檛 be reported to the credit bureaus 鈥� until you鈥檝e missed three months of payments. Your loans will go into聽聽after nine months of missed payments, and at that point, the government can take聽money from聽your paycheck or tax return to recover your debt.

9. You can consolidate federal loans without having good credit.

If you have multiple federal loans 鈥� perhaps you鈥檙e even paying separate bills to different聽聽鈥� you can easily聽聽into one payment. Consolidation makes some loans eligible for Public Service Loan Forgiveness and income-driven repayment plans. It鈥檚 also one of three structured ways to聽. But it won鈥檛 save you money:聽Federal consolidation just results in a weighted average of your prior interest rates.

You can also聽, which might聽lower your rates. Refinancing requires a credit check, though, so you鈥檒l need good credit or a co-signer to get a new private loan.

10. Your federal loans will be canceled if you die.

If you die or are permanently disabled, the government will discharge your federal loans 鈥� meaning that they聽no longer聽need to be repaid. It will also discharge any parent PLUS loans taken out on your behalf if the parent who holds them passes away.

Private loans don鈥檛 work the same way. Lenders aren鈥檛 required to offer聽death or disability discharge, though some do. If you die, your co-signer might be responsible for repaying the remaining balance. Private loans can also go into so-called 鈥渁uto default鈥� if a co-signer dies, requiring the student聽to repay the total outstanding balance right away.

Avoid taking on that extra risk by borrowing the聽聽of federal loans before you take out private loans. Many students miss out: Almost half of all college students who took out聽a private loan in 2011-12 didn鈥檛 max out their federal loans first, according to the Institute for College Access and Success, an education advocacy nonprofit. But now you know better.

This article first appeared at .