Biology senior Michael Pena relied on federal loans for several semesters but had to take a private loan for his classes this summer.
Pena said he would have to repay the private loan with money he has saved over the years.
"I'd have to pay some $3,000 to $4,000 loan - some astronomical amount," Pena said. "They get you either way. You're going to have to pay more than in a [federal] loan."
According to data released by the University, many students prefer federal loans over private loans when seeking financial aid for their college education.
Private loans' high interest rates and inflexible repayment methods make them less popular, said Henry Urick, interim associate director of the Office of Student Financial Services.
During the 2007-2008 school year, UT Student Financial Services processed 15,000 to 16,000 federal aid loans totaling $200 million. The number of private loans processed totaled $10 million.
Students run the risk of having to repay loans from multiple lenders, making the payment process more difficult. Interest rates for private loans are usually higher than the fixed 6.8 percent rate for federal loans.
Federal loans are also more popular because of easier access. Most private loan providers require credit and background checks before granting assistance.
"Federal loans are entitlements - if eligible, you get the aid," said Jane Glickman, spokeswoman for the Federal Application for Student Assistance, in an e-mail. "Unlike states and institutions, Uncle Sam never 'runs out of money.'"
The private loan made Pena re-think the longevity of his college career.
"Definitely the financial toll of taking a private loan makes you think about how much longer you want to be in school," Pena said. "It tends to postpone things."
