In the last 18 months, we have seen nearly twice as many private student loan lenders come into the market. Many of them, as well as credit unions, are making student loans easy to get at favorable interest rates. However, it’s important to remember that student loans from private lenders have variable interest rates, unlike Federal or student auto loans, which are fixed. So although the initial interest rate might look favorable, it could change.
Additionally, Federal loans have more student-centric repayment options, such as income-based repayment plans and deferments for financial hardships. Private lender are not so generous. For more information on the resurgence in private student lenders, read this Smart Money article.