How To Get Student Loans [Federal and Private]

There are several types of federal and private loans available to help you pay for college, but the process of finding and applying for the right loan for your circumstances can feel overwhelming. Understanding your options and how to be a responsible borrower can help you feel more confident about securing the best loan for your educational needs. 

In this article, we’ll explain how to get a student loan and what you need to know. 

Compare student loan options first

Borrowers have a range of student loan options available to them, including federal and private student loans. The various loan types have different requirements, interest rates, fees, and repayment terms. It’s important for you to research your loan options to find the best loan for your circumstances.

Some factors you’ll want to consider while researching student loans may include:

• Eligibility requirements: What loans are you eligible for?
• Application process: What information and documents do you need to apply?
• Fees: What kinds of application, origination, or other fees might you have to pay?
• Rates: How are the interest rates calculated? Is there anything you can do to get more favorable rates?
• Repayment: When does repayment begin and how long is the repayment period?
• Deferment and forbearance: Does the loan let you defer payments during school? Does it offer forbearance because of economic hardship? How does interest accrue during deferment and forbearance periods?

Researching available student loans with these questions in mind can help you find the lowest interest rates and most favorable terms, which can save you money over the life of your loan. 

How to get federal student loans

Federal student loans are offered by the U.S. government, and interest rates are set by Congress. Federal loans also offer certain benefits, such as income-driven repayment plans, potential loan forgiveness, and generous forbearance options that borrowers generally can’t expect from private lenders.

There are three types of federal student loan options available to borrowers: 

• Direct Subsidized Loans: These loans are available to undergraduates who demonstrate financial need. The government pays interest on the loan while you’re in school at least half-time, during your six-month grace period after graduation, and during a deferment. 
• Direct Unsubsidized Loans: Both undergraduate and graduate students are eligible for unsubsidized loans, regardless of financial need. Unlike subsidized loans, you’re responsible for paying all interest that accrues. 
• Direct PLUS Loans: These loans are for graduate or professional students and parents of dependent undergraduate students. Unlike the other federal loans, a credit check is required. 

Pros and cons of federal loans

Federal student loans come with many benefits, but they may not be the right fit for every borrower. Here are some of the benefits and drawbacks of these types of loans:

Pros

• A credit check is not required to qualify for most federal loans.
• Loan forgiveness is possible for some borrowers.
• Repayment doesn’t begin until six months after graduation, leaving school, or dropping below half-time enrollment.
• Forbearance and deferment options are available, which allow you to temporarily pause payments if you’re struggling financially or experiencing another qualifying circumstance.
• Eligible borrowers have access to income-driven repayment plans that base payments on a percentage of your discretionary income, and your family size.
• Interest rates are fixed and may be lower than those for private student loans. 

Cons

• Federal student loans (except Direct PLUS Loans) are subject to annual and aggregate borrowing limits.
• Borrowers pay a 1.057% loan fee if loans were taken out on or after Oct. 1, 2020, which is deducted from each disbursement.
• Unless you have a subsidized loan, interest accrues while you’re in school.
• Federal student loans could have higher interest rates compared to private student loans you might qualify for.

Applying for federal student loans

To apply for federal student loans, you must first register for the FAFSA, or the Free Application for Federal Student Aid. By filling out this form, you’ll not only be able to see your options for federal student loans, but also other federal or state aid, including grants, scholarships, and financial aid from the colleges or universities that accept you.

Filling out the FAFSA should be the first step any prospective student takes to secure college funding. Many schools and states use the FAFSA to determine who is eligible for aid, including grants and scholarships that don’t need to be repaid. Be sure to submit the FAFSA as early as possible since some financial aid is given out on a first-come, first-served basis.

How to get private student loans

Private student loans are offered by banks, credit unions, and other private institutions. This means each lender sets its own eligibility criteria, interest rates, and repayment terms. Private lenders use your credit score and income level to determine your loan amount, rate, and terms. 

Many college students might struggle to qualify for a private student loan due to limited credit history, low credit scores, or insufficient income. In these cases, you usually have the option to add a cosigner with good credit to help you qualify. 

Private loans may also have fixed or variable interest rates. Variable rates tend to be lower to start with compared to fixed rates, but there’s a risk that rates can go up and increase your monthly payment.

Make sure to carefully research private student loan options and compare rates and terms to get the best loan for your needs. And remember to exhaust your federal loan options before turning to private loans.

Find Your Student Loan

Pros and cons of private loans

Private student loans can help you fill in important funding gaps when paying for college, but they’re not the right option for everyone. Make sure you consider the pros and cons of private student loans before applying.

Pros

• These loans have higher borrowing limits than most federal loans.
• Borrowers with excellent credit may qualify for loans with lower interest rates than federal student loans.
• Private student loans are available to borrowers who don’t meet certain federal student loan eligibility requirements.

Cons

• Borrowers with bad credit risk paying more in interest (or not qualifying for a loan at all).
• Deferment and forbearance options are not guaranteed, and terms vary by lender.
• Interest typically accrues during school for all borrowers.
• Private student loans are not eligible for federal benefits, such as income-driven repayment plans or forgiveness programs. 

Applying for private student loans

Borrowers should wait to start applying for private student loans until after they have received their financial aid offer letter from their chosen school. 

Your financial aid offer letter will outline the grants or scholarships that you may be eligible for, as well as what federal student loans you may access. Private student loans are often more expensive and have more stringent repayment requirements than federal loans, so it’s smart to borrow as little as possible from private lenders. 

The application process for private student loans will vary from one lender to the next. Make sure you compare multiple lenders before settling on a loan. This will help you find the best loan with the most favorable rates and terms for your situation.

Tips for a successful application

There are several things you can do to increase your chances of getting an affordable private student loan. Here are the most important tips for a successful application:

• Improve your credit score: The higher your credit score, the better rates you will qualify for with private lenders. Paying bills on time, paying down debt, and limiting the amount of new credit you apply for will all help to boost your score.
• Have your documentation ready: Know what information and documents you will need and have them ready when you apply. This will make the application process much smoother.
• Consider applying with a cosigner: Applying with a well-qualified cosigner can help you qualify for a loan with a lower rate or more favorable terms. Your cosigner will be responsible for repaying the loan if you default, but many private lenders offer cosigner release after a certain number of on-time payments.

Federal vs. private: Which should I choose? 

Choosing between federal and private student loans depends on your individual situation. However, it’s generally advised to exhaust all your federal student aid options before resorting to private loans. That’s because federal student loans typically offer more flexible repayment terms and forgiveness options, among other benefits. Plus, there’s a chance you might qualify for other federal aid, like scholarships and grants that don't need to be repaid.

It’s common for many students to opt for federal student loans first, and then use private loans to cover any remaining funding gaps. It’s also worth noting that some borrowers with strong credit backgrounds might find lower interest rates with private loans. The choice ultimately comes down to what makes the most financial sense for you. 

Check Out: How To Get Into College for Free

Borrow responsibly

Borrowing responsibly can help you avoid spending more money than you can afford. That’s why you should exhaust your options for scholarships, grants, and other financial aid that you do not have to repay before accepting student loans. 

Prioritizing financial aid that does not have to be repaid will help ensure that you only borrow what you need. You’ll be glad to have smaller loans, because that will help you avoid paying more in interest over the life of the loan.