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What are the different ways to pay for college or graduate school?


You should exhaust scholarships, grants, and federal student loans before taking out a private student loan.

You have a choice about how you pay for your education. Understanding your choices can help you make the right decision for your situation. 

Search for scholarships and grants.

Grants and scholarships are often are a type of financial aid that does not have to be repaid. Grants are often need-based, while scholarships are usually merit-based.                                   

Look for scholarships and state and local grants    using one of the many free scholarship search options available. Do your research and apply by the deadlines.

If you must borrow to cover the cost of your education, apply for federal student loans.

It is best to max out your federal student loans before you borrow any private student loans.

There are important differences between federal student loans and private student loans:

Federal student loans can be better for students in several important ways:

  • In some cases, the federal government will subsidize - pay the interest on - your federal student loan while you are in school.
  • Your interest rate for a federal student loan is generally fixed, not variable. Private student loans can have fixed or variable-rate interest rates. A variable rate means that your interest rate and your payment can change.
  • Federal student loans allow you to enroll in a repayment plan based on your income. This limits the amount you must repay each month based on your income.
  • Loan forgiveness on federal student loans may be available after 10 years working in public service.

You must complete the FAFSA to be eligible for any federal student loans, work-study , or grants. Read more

If your grants, scholarships, and federal student loans are not enough to cover the cost of your education, you should consider other options.

  • Cut costs. Consider getting one or more roommates or a part-time job.
  • See what your family can contribute. Your parents may be able to get tax credits for their contributions.

Shop for a private student loan only after you have exhausted all other options

Private student loans are any student loans that are not federal student loans. These loans do not offer the flexible repayment terms or protections provided by federal student loans. Private student loans are not funded or subsidized by the federal government. Private student loans are funded by banks, credit unions, state loan programs, or other types of lenders.

You generally should turn to private loans only after you have explored all other grant, scholarship, and federal loan options. Private student loans generally have variable interest rates, which can reset every month or quarter, causing your monthly payments to change.

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The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The CFPB updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.