How to get a student loan

Paying for college can be a challenge for many students. After all, grant and scholarship dollars only stretch so far, and borrowing money may be the only way to afford higher education.

If you qualify, you can get a student loan through the federal government by filling out your Free Application for Federal Student Aid (FAFSA), or you can apply with a private lender to get the financing you need. Many students will finance part of their education through federal loans and apply for private loans to cover any gaps. The application processes for federal and private student loans are separate, and lending terms tend to differ.

That said, evaluating all of your funding options, as well as the potential benefits and downsides to each option, is a smart approach when putting together a higher education payment plan. But before borrowing funds, you may want to use a student loan calculator so you know what to expect when the time comes for repayment.

How to get a federal student loan

To unlock federal student loans and federal student aid, you’ll need to fill out the FAFSA form. It’s free and opens in October each year. Fill it out the year before you plan to attend school and reapply with a new FAFSA form each school year.

Because federal student loans come with generous borrower protections and no credit check, it’s best to apply for these before seeking private loans, especially if you’re an undergraduate student.

Here’s how to get started:

1. Set up an account. Before you apply for a federal student loan, you have to create a Federal Student Aid (FSA) account to complete the FAFSA online.
2. Gather your documents. You can get a sneak peek of the FAFSA on the worksheet provided by the FSA. Compile a list of schools that should receive your FAFSA form and gather your Social Security number, driver’s license number, federal tax return, proof of income (usually with W-2 forms) and current bank statements. You’ll also have to collect these materials from your parents if you’re listed as a dependent.
3. Fill out the forms. The FAFSA takes about 30 minutes to complete.
4. Review your SAR. After you submit the FAFSA, the Department of Education will send you a Student Aid Report (SAR), which shows you a summary of all the information you’ve entered. Review the SAR for accuracy.
5. Receive your financial aid offers. The colleges you listed on the FAFSA will calculate your financial aid and send you a financial aid letter, which may include a mix of loans, grants and work-study options.
6. Complete loan counseling. Before you receive a loan, you’re required to complete loan entrance counseling to learn how your loan works, including repayment terms and how to avoid defaulting. You’ll also be required to sign a promissory note before accepting the loan.
7. Accept your financial aid offer. The amount of aid you’re offered will vary by school. Once you’ve compared offers and chosen a school, contact the school to accept the financial aid. If it includes federal student loans, the school will tell you how to accept them.

​​When you get your results, you’ll find out whether you qualify for subsidized or unsubsidized federal student loans. Subsidized loans are for undergraduate students with financial needs. If you qualify, the U.S. Department of Education will pay your interest costs while you attend school and during deferment. You pay all interest costs with an unsubsidized loan, and that interest starts accruing at the time of disbursement.

How to get a private student loan

If you’ve hit your federal student loan borrowing limit or don’t qualify for federal financial aid, you may need to cover the remaining academic costs with a private student loan. These come from banks, credit unions and online lenders.

Here’s how to get student loans from a private lender:

1. Shop around with multiple lenders. Compare loan amounts, interest rates, discounts, benefits, fees and repayment plans. Because you’ll likely have a relationship with this lender for several years, it’s also a good idea to evaluate its hardship options in case of financial trouble later. The lender should also have good reviews and responsive customer service.
2. Check your eligibility. Before applying, determine whether your credit history and income meet the lender’s qualifications. You can check your credit reports for free weekly through Dec. 30, 2023, at AnnnualCreditReport.com. To qualify for a private student loan on your own, you generally need to have good credit, which is generally a FICO score 670 or above. Most lenders offer prequalification, which allows you to see if you qualify and what potential rates you’ll receive without hurting your credit. If you don’t meet the requirements, you’ll need a co-signer who can.
3. Complete the application. You’ll typically need to agree to a credit check and provide details such as your school, cost of attendance, type of degree, citizenship information, Social Security number, proof of income and debt obligations. Depending on the lender, the application process can take a few minutes to a few days to complete.
4. Wait for verification. The lender will confirm your cost of attendance with your school, which may take a few weeks. Once your school verifies the information, the lender typically releases the funds directly to the school.

Although private student loans can be a great option when you don’t qualify for enough federal aid, federal loans are generally ideal for a few key reasons. For starters, private loans aren’t eligible for some of the borrower protections that come with federal student loans, such as loan forgiveness and income-driven payment plans. Deferment and forbearance also vary by lender, and if the loan comes with a variable interest rate, it can increase anytime during repayment.

How to get a private student loan

Private student loans are an alternative to federal student loans, providing additional funding when other resources fall short. These loans are offered by private lenders such as banks, credit unions and online platforms, and can be used for tuition, books, room and board and other education-related expenses.

If you’re considering this type of financing, here’s a step-by-step guide to understanding and applying for private student loans.

Where to get a private student loan

There are plenty of options when it comes to securing a private student loan. These include traditional banks, credit unions, online lenders and state-based or state-affiliated organizations. When looking for a lender, consider factors such as interest rates, repayment terms and customer service. Remember to shop around and compare offers from different lenders to find a loan that best suits your needs.

How to get approved for a private student loan

Approval for a private student loan is contingent upon several factors. These include your credit score, income level, and the cost of attendance at your school. Here are some steps to increase your chances of approval:

• Improve your credit score: Make timely payments, keep your credit utilization low, and regularly check your credit report for any errors.
• Consider a co-signer: If you don’t have a strong credit history, consider asking a parent or other trusted individual with good credit to co-sign your loan. This can significantly increase your chances of approval and potentially get you a lower interest rate.
• Apply with multiple lenders: Different lenders have different eligibility criteria. By applying with multiple lenders, you increase your chances of getting approved. Just remember to apply within a short window of time to minimize the impact on your credit score.

When to use private student loans

Private student loans should be considered after you’ve exhausted all other sources of funding, including federal student loans, scholarships and grants. These loans can be beneficial in certain scenarios. For instance, they might offer higher loan limits, which are useful for covering costs at expensive institutions. Also, if you have a strong credit score and stable income, you might qualify for lower interest rates.

However, keep in mind that these loans generally have less flexible repayment terms and higher interest rates compared to federal student loans.

How to get a low interest student loan

When you’re ready to shop for student loans, use these strategies to find the lowest interest rate available.

• Compare rates: If you plan to take out federal student loans to finance your educational expenses, your rate depends solely on the type of loan you choose. If you’re considering a private student loan,the interest rate you receive with a private lender depends on factors like your credit score, income and whether you’re applying with a co-signer. Getting quotes from a few different lenders is the best way to find a low interest student loan.
• Choose between fixed and variable rates: As their names suggest, fixed interest rates remain the same during the loan term, while variable rates fluctuate over time based on market conditions. While variable rates typically start lower than fixed rates, you may pay more interest over time if interest rates rise. As a result, fixed rates are a better bet in most cases.
• Apply with a co-signer: If you don’t have a credit history, you might find it difficult to qualify for a low interest rate on a private student loan by yourself. If a loved one with a well-established credit history is willing to co-sign for your loan, their good credit could work in your favor. Just keep in mind that co-signing is a big commitment. Your loved one will put their credit score on the line to help you lock in a low interest student loan.
• Improve your credit score: Higher credit scores signal to lenders that you’re a lower credit risk, meaning you’re more likely to repay your loans on time. As a result, many lenders may see you as a more attractive borrower and offer you lower interest rates to win your business. You can typically get approved for a private student loan with a credit score in the mid-600. To obtain a low interest student loan, you or your co-signer should score in the mid-to-upper 700s.
• Choose the shortest loan term: Your loan term, also called the repayment period, impacts the amount of money you pay back to your lender each month. Selecting a shorter term typically translates to a higher monthly payment, but loans with shorter repayment periods often feature lower interest rates.
• Ask about other discounts: In addition to autopay discounts, some lenders offer other opportunities to save money on private student loans. For example, you might come across interest rate reductions such as loyalty discounts when you have (or open) a bank account with the same lender.

What to consider before you get a student loan

You will typically pay back your student loans over the course of many years, so it can be helpful to consider the following before applying.

Borrow only what you need

Borrowing the minimum amount you need to pay for school helps keep your monthly payments lower after graduation. Schools must disclose the estimated cost of tuition, fees and room and board each year in the form of the total cost of attendance (COA). This is often found on the school’s website.

You can use your school’s COA to create a budget to determine how much money you’ll need per academic year. Then subtract any funds you expect to get from scholarships, grants and a part-time job, if applicable. Private student loans can then finance the remaining costs.

Think about the long-term financial impact

Before applying for loans, crunch the numbers to understand the long-term impact of loans on your financial health. Use a student loan calculator to figure out what your monthly payments will be after graduation and whether you’re comfortable with the amount. Also, check how long it will take to pay off the debt and how much interest you’ll pay over the life of the loan.

Explore other ways to pay for college

Student loans, whether federal or private, have to be repaid at some point, and all loans come with an additional charge in the form of interest. Grants and scholarships, however, don’t have to be repaid as long as you meet the requirements.

Some colleges, universities and career schools offer institutional grants, so ask the financial aid office about your options. You can also apply for scholarships and grants offered by private organizations — scholarship search engines maintain databases that list millions of aid opportunities. You can also take a part-time job during school to help defray the costs of tuition or rent. Some employers may even offer tuition reimbursement as a benefit, though you may have to work for a certain amount of time to qualify.

The bottom line

Knowing how to get a student loan is a crucial part of planning for college, especially if you’ve exhausted your scholarship and grant options. Start by filling out the FAFSA to see how much federal aid you can qualify for. Then, assess your aid package, including federal student loans, before determining how much of a gap there may be to cover your total bill.

You may borrow private loans to cover the remaining costs after your aid package and available funding run out. It’s important to evaluate the terms of any loan you opt to borrow, whether public or private, and understand the commitment you’re signing on for in advance. Make sure you understand repayment options and interest rates as you proceed through the loan application process.

Frequently asked questions

• How do you qualify for a student loan?

  To qualify for a student loan, complete the FAFSA to check for federal loan eligibility. Federal loans require U.S. citizenship or eligible noncitizen status, a valid SSN, enrollment in an eligible program, satisfactory academic progress, and for men ages 18-25, Selective Service registration. Direct Subsidized Loans are need-based, while Unsubsidized and PLUS Loans are not. Private loans require a credit check and may need a cosigner, with specific lender criteria for eligibility.

• Is it hard to get approved for student loans?

  Approval for student loans depends on the loan type and your financial situation. Federal student loans usually don’t require a credit check, making them easier to get for most students. However, private loans often require a good credit score, a minimum income and at least half-time enrollment in an eligible institution. If you don’t meet these criteria, a cosigner may be necessary. Always check the eligibility requirements and consider federal loans first for their favorable terms.

• Can I get my own student loan?

  Independent students can apply for federal student loans without needing their parents’ income information by completing the FAFSA. Factors like age, marital status and military service can qualify you for independent status. If you’re a dependent student unable to provide parent info, consider a dependency override or unsubsidized federal loans. Private student loans are also an option, potentially requiring a co-signer or proof of creditworthiness or academic merit.