Sallie Mae, the nation’s leading private college loan lender recently unveiled a new loan program designed to make loans more affordable. It’s indeed an improvement over existing private loans, but less-expensive federal loans should still be your first loan option.

The new Smart Option Student Loan rolled out by Sallie Mae requires all borrowers to pay the interest on their loans while they are in school. While borrowers have always been able to pay interest during school, most borrowers instead opt to skip any payments-of interest or principal-while in school and have the interest payments added to the loan balance. That’s what is called “capitalizing” the interest cost; and it can add thousands of dollars to the total cost of a loan. By requiring borrowers to make interest payments while in school, Sallie Mae is actually helping reduce the overall loan cost.

The new Sallie Mae loan program also shortens the repayment period to no more than 15 years, or about half the maximum available under typical private loan programs. Again, the aim is to help borrowers reduce their total costs: the faster you repay a loan the less you owe in total interest.

That’s all good news, but it still doesn’t change my stance: private loans are best used as a last resort. While the Sallie Mae program does indeed include some nice consumer-friendly innovations, there is no getting around the fact that private loans are more expensive than federal loans.

The maximum interest rate on a federal Stafford loan that students can take out to pay for college (there is no family income cut off to be eligible) is a fixed rate of 6.8%. Parents can also borrow from the federal government to help pay for college; the maximum interest rate on a parent PLUS loan is a fixed rate of 8.5%.  Now let’s compare that to the interest rate on the Sallie Mae Smart Option Loan: like all private loans it is a variable interest rate, meaning it will fluctuate over time based on changes to the benchmark index it is tied to. In this case, Sallie Mae’s benchmark is the LIBOR index. The loan’s interest rate is LIBOR + 10.5%. With LIBOR currently at 0.5% that puts the base interest rate at 11%; the actual APR of the loan, according to Sallie Mae is 11.6% once all fees are accounted for. I don’t think you need a college degree to grasp the math here: 11.6% is a lot more than 6.8% or 8.5%. And remember, the 11.6% is variable; given that LIBOR is currently at 0.50% there’s not a whole lot of room for it to go down from here, but plenty of room to rise. When that happens, the 11.6% rate will increase.

Bottom line: Always turn to federal Stafford loans and PLUS loans first. They are the far better deal.