Both federal and private student loans are available to borrowers, but federal loans should be taken out first.
7 out of 10 students borrow money to pay for college. You can select federal or private student loans if you fall into this category.
Always begin with federal loans as an undergraduate. They provide borrowers with more generous protections, such as income-driven repayment and loan forgiveness than private student loans, and they don’t require a credit history or co-signer.
Prior to borrowing, consider your repayment options. Calculate the cost by entering the amount into a student loan payment calculator. You’ll be paying this charge every month for at least ten years. Only borrow what you actually need; don’t take on debt that you won’t be able to repay after graduation, either in terms of amount or interest rate.
Where to apply for a federal student loan
FAFSA should be submitted first.
Fill out a Free Application for Federal Student Aid, or FAFSA, to see how much non-repayable financial aid you might be eligible for, including grants, scholarships, and work-study. About 30 minutes are needed to finish it. Each school will use the FAFSA you apply to calculate your financial aid; the difference between aid and the cost of attendance is what you are responsible for paying.
Prioritize subsidized loans while taking out new ones.
Your application for federal student loans is made through the FAFSA. Any school that accepts you will let you know how much you can borrow in the financial aid award letter. Federal loans come in two varieties: subsidized and unsubsidized.
Federal loans with subsidies are given to undergraduates who have a need. While you are a student, the subsidy pays the loan’s interest. Federal unsubsidized loans are made regardless of financial need, and interest is charged right away.
Methods for obtaining a private student loan
Any costs that are not covered by grants, scholarships, work-study, or federal loans should be covered by private student loans. If you or your co-signer have good credit, they are a potential choice.
What lenders provide private student loans
Student loans are available from banks, credit unions, state-based organizations, and online lenders. Shop around with various lenders, weighing the interest rates provided with the repayment flexibility and forbearance options.
How to obtain private student loan approval
Most private lenders will demand that borrowers have a solid credit history and a source of income that can cover loan payments as well as other obligations (in other words, a low debt-to-income ratio). You’ll need a co-signer if you don’t meet those requirements.
Although a co-signer isn’t expressly listed as a requirement by private lenders, it will be difficult to obtain a private loan without one. For the 2020–21 academic year, almost 87% of all new undergraduate private student loans had a cosigner, according to a 2021 study by MeasureOne.
Some private lenders cater loans toward independent students if you don’t have a co-signer, but you’ll pay more.