My Viral Take on Private Student Loans (And Why the Full Story Matters)

A few days ago, I posted a TikTok that unexpectedly took off.

In the video, I said that private student loans can be a "death sentence" and that, in most cases, students should exhaust every other avenue before relying on them.

As you can imagine, the comments were mixed.

Some people completely agreed. Others pointed out that they had excellent credit and received lower interest rates through private lenders than they would have with federal loans. One commenter asked a really thoughtful question:

"Aren't private loans sometimes better if your credit is good because the interest is lower?"

The answer is: sometimes, yes.

But the interest rate is only one piece of a much bigger picture.

Why I Made the Video

The inspiration for the video came after speaking with a prospective graduate student who needed to borrow around $60,000 for school.

The challenge? They had poor credit.

For many students, this creates a difficult situation. Private lenders often base approval and interest rates on your credit history, income, debt, and sometimes the creditworthiness of a cosigner. Without those things, qualifying—or qualifying at a reasonable rate—can be incredibly difficult.

That conversation reminded me just how many students enter graduate school without fully understanding how different federal and private loans really are.

Federal Loans vs. Private Loans

Let's break it down.

Federal Student Loans

Federal loans aren't perfect. They often come with higher interest rates than the best private loan offers.

But what you're paying for isn't just the money—you're paying for the protections.

Federal loans may offer:

• Income-driven repayment plans based on your earnings.

• Temporary relief if you experience financial hardship.

• Potential eligibility for Public Service Loan Forgiveness (PSLF).

• Fixed interest rates set by the federal government.

• No credit check for most Direct Unsubsidized Loans for graduate students.

Those protections can become incredibly valuable over the course of a career.

Private Student Loans

Private loans aren't inherently "bad."

For borrowers with excellent credit—or a qualified cosigner—they can sometimes offer lower interest rates than federal loans.

However, private loans typically:

• Depend heavily on your credit profile.

• Offer fewer repayment protections.

• Usually don't qualify for federal forgiveness programs.

• Have lender-specific terms that vary widely.

For some people, they make financial sense.

For others, they can become a long-term financial burden.

Why This Matters for Future Psychologists

Many of us pursuing PsyD or PhD programs aren't entering careers where we'll immediately earn six-figure salaries.

Clinical training often includes years of internships, postdoctoral training, and early-career positions before reaching your long-term earning potential.

Many psychologists also choose careers in:

• Hospitals

• Community mental health

• Universities

• Veterans Affairs (VA)

• Nonprofit organizations

• Schools

These employers may qualify for Public Service Loan Forgiveness, meaning federal loans could provide benefits that private loans simply don't.

That's why comparing loans based solely on interest rates can be misleading.

My Advice

If you're considering borrowing for graduate school, don't just ask:

"Which loan has the lowest interest rate?"

Also ask:

• What happens if my income is lower than expected?

• What if I need flexibility during internship or postdoc?

• Will I qualify for loan forgiveness?

• Can I realistically afford these monthly payments?

• Have I explored scholarships, assistantships, employer tuition benefits, or less expensive programs first?

Those questions matter just as much.

The Bottom Line

My TikTok was intentionally short and attention-grabbing. Social media doesn't always leave room for nuance.

So here's the nuanced version:

Private student loans aren't always the wrong choice. In a few cases, they can absolutely make financial sense.

But before taking out tens of thousands of dollars in private debt, make sure you've exhausted every other option and understand what you're giving up—not just what you're gaining.

Graduate school is an investment in your future, but it's one you'll likely be paying for long after graduation.

Make sure you're choosing the loan that supports not only your education, but the life you want to build afterward.

Disclaimer: This article is intended for educational purposes only and should not be considered financial advice. Loan decisions are highly individual. Consider speaking with your school's financial aid office or a qualified financial professional before making borrowing decisions.