Federal Direct PLUS loans are offered by the government, while private loans are offered by private lenders. Federal PLUS loans are available through the FAFSA and doesn’t require you to have a good credit history or credit score. You can learn more about the FAFSA application process at: https://studentaid.gov/h/apply-for-aid/fafsa.
However, Federal PLUS loans do have a mandatory loan origination fee and a flat interest rate. Private student loans typically have no loan fees, and your interest rate depends on your credit profile or that of your cosigner, if applicable.
Federal student loans are a good way to cover medical school costs because it comes with certain protections. Federal programs offer borrowers certain protections that private student loans may not, such as income-based repayment programs and public service loan forgiveness on student loan debt. Private student loans offer different loan terms and may offer a lower interest rate. Income-based repayment or loan forgiveness programs for medical school debt are benefits of federal student loans, but a private lender may also offer you other perks, such as flexible payment terms or a lower interest rate.
Federal student loans have borrowing limits (similar to limits on credit cards). If the cost of attendance exceeds the federal loan amount, that means you will need to cover the leftover cost. Graduate students may apply for no-cap Direct loans from the government, but undergraduate students do not have this option.
Cost of attendance
Many students choose to apply for a loan with a private lender to cover their leftover costs. Earnest private student loans, in addition to covering the entire cost of attendance, also have rates that are based on the credit profile of you and/or any cosigner you have. This may mean higher or lower rates than those offered by federal loans, depending on the credit profile.
Grace periods, origination fees, and disbursement
A private student loan may offer a longer deferment period or grace period than a federal student loan. Some private loans, such as Earnest private student loans, don’t have an origination fee while some federal student loans do. If you are approved, your Earnest Private Student Loan will be disbursed (sent) directly to your school and not to your bank account.
With an Earnest private student loan, you get a 0.25% APR reduction when you agree to make monthly principal and interest payments by automatic electronic payment.
Before looking for loans with private financial institutions, such as online lenders, credit unions, or banks, explore all of your student loan options with the federal government to cover your medical school costs.