12
QuizMultiple Choice

Spending

Question 12 • * HSA 26-27 Economics

One reason a student may seek a federal student loan instead of a private student loan is that

Answer
A
private loans carry a higher interest rate than federal loans.
B
federal loans are obtained by banks, while private loans are backed by the government.
C
federal loans must be paid back more quickly than private loans.
D
private loans are only available to parents, while federal loans may be issued to the student.

Explanation

Federal student loans often have lower interest rates and more predictable terms than private loans, so a student may choose a federal loan to borrow at a lower cost. Private-loan rates vary by lender and borrower, so they are not always higher, but this is the best choice. Federal loans are government-backed, and students—not just parents—can receive them.

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