When it comes to the difference, the most basic difference between government and present loans is the fact that federal loans are provided by the government, whereas private loans are provided by organizations in the private sector, such as private banks, credit unions, state agencies, or schools.
However, federal loans are better gambles than private loans, as they often have lower rates of interest. Also, most federal loans have fixed interest rates, whereas the interest loans of private loans tend to fluctuate depending on the economic market. Federal loans may also wait a while before asking for repayment of the loan, whereas private loans usually require one to immediately start trying to repay the loan.
However, federal loans may have a cap on how much can people borrow, whereas private loans have such a cap; people can borrow as much as they need provided that they have the means to be able to pay off the loans. Further, federal loans usually do not require a cosigner to sign for the loan on your behalf, whereas for quality for a private loan, one may require a cosigner.
Repayment
Some federal loans may differ asking for repayment until a few months, or years.
Private Loans usually ask for repayment immediately, as soon as the month when the loan was approved.
Regulation
Federal loans are funded and tightly regulated by the federal government.
Private loans are not subsidized by the government and therefore are not regulated as closely.
Cap
Federal loans may often have a cap, which means they can only allow one person to borrow so much.
Private loans usually do not have a cap, and borrowers can borrow as much as they want or need, as long as they have the means to repay them.
Interest Rates
Federal Loans usually have lower interest rates.
Private Loans usually have higher interest rates than federal loans and these rates may differ depending on the type of loan, and the organization providing the loan.
Variable interest rates
In federal loans, the interest rate is usually fixed over the term of the loans.
In private loans, the interest rates may fluctuate on a year-to-year basis, depending on the market.
Cosigner
Usually do not require a cosigner
May require a cosigner to qualify for a loan.
Tax deductible
Interest may be tax deductible.
Interest may not be tax deductible.
Deferment
If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
Private loans may not offer forbearance or deferment options.
Prepayment penalty fee
There is usually no prepayment penalty fee
There may be a prepayment penalty fee
Loan forgiveness program
You may be eligible to have some portion of your loans forgiven if you work in public service.
It is unlikely that any part of the loan will be forgiven.
Summing up these were the basic difference between government and private loans. Although there are many more to look into.