How To Get a Student Loan: Eligibility Requirements for Borrowers

Student loans are a common way to pay for college when scholarships, grants, and savings don't cover the full cost of attendance. Around 30% of adults who attended college from May 2023 to May 2024 borrowed money to make it possible, according to the Federal Reserve. 

If you're thinking about taking out student loans to pay for your education or to bridge a funding gap, it's important to understand your options and their impact on repayment of these loans in the future. Whether you're considering federal or private student loans, knowing what each one looks for can help streamline the borrowing process. 

Federal loans are usually the first place you'll want to start because they often have better benefits than private loans, like flexible repayment options and fixed interest rates. Private student loans are another option after you've exhausted your federal aid but still have educational expenses to cover.

Both loan options have similar eligibility requirements, but they also have important differences you should know before applying for and accepting financial aid.

How to get a student loan

Applying for and getting a student loan involves several steps, which depend on the school you want to attend and the kind of loan you want. Two main types of loans are available to student borrowers and/or their parents: federal and private student loans. Each option comes with its own set of benefits, terms, and repayment options.

Federal student loans

Federal loans are provided by the U.S. Department of Education and are considered the most borrower-friendly. You must apply through the Free Application for Federal Student Aid (FAFSA). Most federal loans don't require a credit check. They also come with fixed interest rates, but include borrowing limits on certain loan types. Federal loans have different repayment options and benefits, including income-driven repayment plans and potential loan forgiveness.

Private student loans

Private student loans are primarily offered by banks, credit unions, and online lenders. They usually require a credit check to evaluate your creditworthiness. Most private lenders will let you apply with a cosigner if you don't meet their specific criteria. Private student loans offer both fixed and variable interest rates but have fewer repayment options and borrower protections than federal loans.

These are the key differences between federal and private student loans:

Federal student loan eligibility requirements

Federal student loans should generally be your first step when borrowing for college. They offer significant advantages over private loans, including potential loan forgiveness and protections like deferment and forbearance, which allow you to pause loan payments during periods of financial hardship.

To qualify for federal student loans, you must:

• Be a U.S. citizen or eligible noncitizen
• Have a valid Social Security number
• Enroll in a degree or certificate program at an eligible school
• Maintain satisfactory academic progress while enrolled in school
• Have a high school diploma, GED, or equivalent
• Consent to have your federal tax information transferred to your FAFSA application
• Not have any federal student loans in default or owe a refund of a federal grant

How to apply for student loans through FAFSA

For federal student loans, the government limits how much you can borrow each year and over your lifetime, depending on your grade level and dependency status.

Create a Federal Student Aid (FSA) ID

To get started with federal aid, you must create an FSA ID — a unique username and password required to complete the FAFSA and access your account on StudentAid.gov. Setting up your FSA ID is quick and straightforward, requiring basic information like your Social Security number, date of birth, and email address.

Submit the FAFSA

To apply for a federal student loan, you must complete and submit the FAFSA. The application must be submitted for every year you want to use federal student loans to pay for your education. The FAFSA application opens around Oct. 1 each year. Schools use the FAFSA to determine your eligibility for various financial aid, including federal student loans, scholarships, grants, and work-study opportunities.

The FAFSA is available online and typically takes less than an hour to complete. Here's what you'll need to fill it out:

• Your FSA ID (and your parent's FSA ID, if you're a dependent student)
• Your Social Security number
• Your date of birth
• Your email address
• Details about your income and assets (or your parent's, if applicable)

If you're a dependent student, you must have a contributor — a parent or spouse — provide their information, including a consent to transfer their tax data directly from the IRS to the FAFSA application. Contributors must also sign up for an FSA ID to complete their sections and sign the FAFSA form.

Review financial aid offers

After submitting the FAFSA, the schools will send you a financial aid award letter outlining the types of aid you qualify for. This can include scholarships, grants, federal work-study, and various federal student loans:

• Direct Subsidized Loans: These loans are available to undergraduate students who demonstrate financial need on their FAFSA. The government pays the interest while you're in school and during the 6-month grace period following graduation, reducing your overall borrowing costs. The school determines how much you can borrow, and the amount can't exceed your financial need.
• Direct Unsubsidized Loans: These loans are available to both undergraduate and graduate students and don't require proof of a financial need, making them more accessible. The amount you can borrow is determined by your school's cost of attendance, less any other financial aid you receive. You're also responsible for paying the accrued interest.
• Direct PLUS Loans: Graduate students and parents of dependent undergraduate students can apply for PLUS loans, also called parent PLUS loans or grad PLUS loans. To qualify, you usually have to have good to excellent credit.

Direct Subsidized and Unsubsidized Loans have borrowing limits that dictate how much money you can receive, depending on your academic year in school and dependency status. PLUS loans help cover your school's full cost of attendance after any other financial aid you may receive.

If your application is denied, it could be because you don't meet the eligibility criteria or need to provide additional documentation. Graduate students and parents applying for PLUS loans may face another potential obstacle.

“For federal loans, this would come from an adverse credit history. You could obtain an endorser, who agrees to pay your loans if you do not. You can also file an appeal if there are extenuating circumstances,” says Erik Kroll, certified financial planner and president of Student Loans Over 50.

Accept your financial aid offer

After reviewing your financial aid offers and choosing a school, you can officially accept your federal aid. Start with any grants and scholarships because they don't have to be repaid. If you've qualified for a Direct Subsidized Loan, prioritize it next since it's usually a more cost-effective option. Remember only to borrow what you need to cover your educational expenses.

If you're a first-time borrower, you'll also have to complete entrance counseling to understand your responsibilities and to sign a Master Promissory Note agreeing to the loan terms.

Federal loan funds are sent to your school first to cover tuition, fees, and, if applicable, room and board. If money is left over, the school sends you the remaining balance, which can only be used for qualified educational expenses, like textbooks, supplies, or electronics.

Check Out: What Is the Average Cost of College?

Private student loan eligibility requirements

The eligibility criteria for private student loans are similar to those for federal loans but go a step further with checking credit scores and income. Every lender has different qualifications but, in general, you must:

• Be a U.S. citizen or permanent resident
• Have a Social Security number
• Be at least 18 years old with a high school diploma or equivalent
• Have a good credit score
• Meet the lender's minimum income requirements
• Be enrolled at least half-time in an eligible program

How to apply for private student loans

Once you've maxed out your federal student loan options, private student loans can help cover any remaining balances. Lenders may allow you to borrow up to the full cost of attendance, but eligibility depends on several factors like credit history and income (or that of a co-signer). These loans should generally be a last resort because they lack the protections and benefits federal loans offer, including forgiveness programs and specific repayment plans.

Here's everything you should do to apply for a private student loan:

Check your credit score

Private lenders check your credit score and income to determine your eligibility and the interest rate you're offered. Most lenders require a minimum credit score — often around 670 — and can reject applications from those who don't meet their criteria. You'll likely need a cosigner to qualify if you have limited or bad credit. The interest rate will likely be lower than if you apply alone.

Before you apply, review your credit report at AnnualCreditReport.com. Check for errors that can bring down your score. If you notice any, contact the major credit bureaus (Experian, Equifax, and TransUnion) to dispute them.

Research lenders

Exploring a range of private student loans from banks, credit unions, and online lenders will give you a better idea of what to expect from each one. Each lender sets its own terms, so comparing your choices is essential. Here's what to look out for:

• Loan amounts: Pay attention to each lender's minimum and maximum loan amounts to ensure they can meet your borrowing needs.
• Interest rates: Check fixed and variable rates to see what works best for your budget. Fixed rates stay the same, while variable rates can change over time.
• Loan repayment terms: Most lenders offer 5-, 7-, 10-, 15-, and some even 20-year repayment term options. Check whether the lender offers one that best meets your needs.
• Credit requirements: Many lenders require a minimum credit score to qualify, usually around 670. However, some lenders don't let you know ahead of time what that is.
• Deferment and forbearance options: Find out if the lender offers repayment flexibility, like pausing payments during financial hardship.
• Cosigner requirements: If you don't meet the lender's credit requirements, check whether they allow a cosigner to help you qualify.
• Fees: Most private loans don't have origination fees, but double-check to avoid unexpected costs.
• Customer reviews: Research customer feedback on sites like Google, Trustpilot, and the Better Business Bureau to get insight into the lender's reputation.

Prequalify with a few lenders

Prequalification allows you to see the potential interest rates and loan terms you could qualify for with a lender before officially applying. Most lenders offer this option without affecting your credit score since it involves a soft credit check instead of a hard inquiry. A hard inquiry usually only happens when you submit a full loan application.

Submit a loan application

Once you've selected a lender, you can submit your application. Most private loan lenders let you apply online, and along with your application, will ask for the following information:

• Proof of income
• Social Security number
• School you'll be attending
• Cost of attendance
• Employer information (if applicable)
• Financial aid award details
• Desired loan amount
• Expected graduation date
• Cosigner information (if needed)

After submitting your application, the lender reviews your information and can either approve or deny your application, or ask that you provide additional documentation, which you should respond to as soon as possible to avoid delays. When your application is denied, the lender should explain the reason they rejected it.

If approved, the lender will typically send funds directly to your school to cover your tuition, fees, and room and board that's not already covered by federal aid you might have received. Any remaining funds will be disbursed to you to cover other education-related expenses, such as textbooks or supplies.

Tips for choosing the best student loan

Federal student loans are almost always the best place to start because of their competitive, stable rates, flexible repayment options, and borrower protections. Private loans can help cover remaining costs but should be used cautiously.

When you're comparing loans, calculate the total borrowing costs. Tools like the Federal Student Aid's loan simulator or a student loan repayment calculator can help you better understand how interest rates, loan terms, and repayment plans will affect your overall payments. If you're unsure about repayment plans or forgiveness options, don't hesitate to ask for help.

“Misinformation has been rampant as the federal student loan litigation makes its way through the courts, so it's important that borrowers reach out directly to their loan servicers with questions about student loan relief, or to certified credit counselors with expertise in student loans working for nonprofit credit counseling organizations,” advises Donna Loitz, housing and student loan counselor lead at American Financial Solutions.