Many families can’t pay for college out of pocket, and student loans are a common solution — 54% of undergraduates from the Class of 2021 left school with some type of debt, according to 2022 College Board data.
You might turn to federal or private student loans to cover your education, but the application process differs significantly depending on which type you need. We’ll break down how to apply for student loans, plus how each type of debt works and the benefits on offer.
How to apply for federal student loans
The Department of Education offers federal student loans, and they include a number of benefits that private student loans don’t.
Most types of federal loans don’t require a credit check, and interest rates are fixed (meaning they don’t change). In addition, many borrowers may find lower interest rates on federal loans compared to what they qualify for with private lenders. Lastly, federal loans offer a number of flexible repayment plans, as well as deferment, forbearance, and forgiveness options.
While federal loans have many benefits, the application process can be quite long. Here’s what to expect.
1. Complete the FAFSA
The Free Application for Federal Student Aid (FAFSA) is a crucial first step in applying for federal student loans. This form collects personal and financial information about you (and your family if you’re a dependent student). Schools then use this data to determine the federal aid you qualify for.
Head to FAFSA.gov to submit a digital version of the form or print out the PDF version to mail in. Filling out the FAFSA can take an hour or less, but to simplify the process, gather necessary documentation ahead of time. Specifically, you’ll want to have the following on hand:
- Your Social Security number
- Your driver’s license number, if you have one
- Your Alien Registration number, if you’re not a U.S. citizen
- Federal tax information, including tax documents and returns
- Records of untaxed income
- Information on your assets (such as bank accounts and investments)
You’ll need to submit the FAFSA every year you attend school — plan to complete it each fall, starting in your senior year of high school.
2. Review your student aid report
After you submit the FAFSA, you’ll receive a Student Aid Report (SAR). This document provides a summary of your FAFSA information and your estimated eligibility for federal loans and grants. Additionally, it might contain a note that you’ve been selected for verification, which means your school needs further documentation to confirm what you’ve reported.
Carefully review your SAR to ensure all of the information is correct. If you don’t find any issues, simply file it away for your records. But if you do, correct or update your FAFSA by signing into FAFSA.gov.
3. Await your financial aid award letter
Each school you’re accepted into should send you a student aid offer. These offers are often mailed out around the same time as admission letters, though the timing can vary based on the school and when you submitted your FAFSA.
This financial aid award letter will lay out the costs for the upcoming academic year at the specific school, alongside any federal loans, grants, scholarships, or work-study opportunities you’re eligible for.
4. Finalize loans and track the disbursement
Coordinate with your school to finalize your loans. Every school has its own process to accept the aid you were offered — contact the campus financial aid office if you have questions or aren’t sure what to do. Generally, it makes sense to accept aid like scholarships and grants first since these don’t need to be repaid. Then, you might turn to loans to cover remaining expenses.
Expect to receive your federal loan funding at least once per school term. Prior to receiving your funds, you may need to complete entrance counseling or sign some final paperwork.
The loan money will first be sent to your school, which will apply the funds toward your tuition, fees, and room and board. Any leftover cash can then be sent to you to use for other education and living expenses — but it’s wise to return any funds you won’t need to your loan servicer. This way, you’ll reduce your outstanding balance.
How to apply for a private loan
Private student loans are made by institutions like online lenders, banks, and credit unions. Unlike federal loans, your private loan eligibility typically depends on factors such as your credit score and income, which is why many undergraduate borrowers need a cosigner to qualify.
Interest rates for private student loans can be fixed or variable and are determined by your credit history and other factors. Generally, private loans have fewer repayment and forgiveness options than federal loans.
However, the application process for private debt is generally faster and simpler. That said, it’s generally suggested to apply for funds one to two months before your tuition’s due date.
1. Check your credit
Because your credit score is such an important factor in private lending, it helps to know where you stand before submitting an application. Luckily, checking your credit is easy and often free.
Many banks, credit cards, and loan companies provide your credit score for free, so check the statements or online portals of your existing accounts. You could also use a free credit scoring service like Credit Karma.
2. Compare lenders
Unlike federal student loans, which come with fixed, standardized interest rates and a set fee, costs vary among private lenders. That’s why it’s so important to compare your options and make sure you’re getting the most affordable loan you can.
As you review lenders, take note of their:
- Interest rates, including whether they’re fixed or variable
- Fees
- Minimum and maximum loan amounts
- Repayment plans
- Loan terms
- Forbearance or deferment options
- Available discounts
If you plan to apply with a cosigner (more on that later), you should also note whether you can release your cosigner at a later date and, if so, what the conditions for doing so are.
Lastly, look at the qualification requirements — you’ll want to see if you actually stand a chance at getting your loan application approved.
3. Prequalify, if you can
Prequalification makes it much easier to compare lenders. To do so, go to a lender’s website and input the requested information. You’ll likely be asked for your:
- Name and contact information
- School name and the degree you’re pursuing
- Annual income
- Credit score range
- Loan amount you plan to request
You’ll instantly get an estimate of your potential interest rate and terms, giving you a more accurate idea of what’s on offer. Plus, prequalifying can be done with a soft credit check, which won’t affect your credit score.
Note that approval is not guaranteed, even if you prequalify. You’ll still need to go through the formal application process, including a hard credit check, before you see the final terms you qualify for.
4. Find a cosigner, if necessary
Because your approval for private student loans hinges on your finances, students — especially undergrads — may have trouble qualifying on their own. In that case, adding a cosigner can improve your chances of approval and help you lock in better rates.
A cosigner is someone who shares equal responsibility for your debt. If you fail to make payments, the cosigner must make them for you. Your cosigner’s credit is also equally affected by your loan, so poor debt management will hurt their score, too.
A cosigner should be a trusted adult with good credit, such as a parent or guardian. Just make sure the other party understands their responsibility, as well as the risks involved.
5. Submit an application
Once you’ve done the necessary groundwork, it’s time to formally apply. Each lender’s application process varies, but in general, they’ll request similar information, such as:
- Name, date of birth, and Social Security number
- Mailing address, phone number, and email address
- Proof of income, such as pay stubs or tax forms
- Monthly rent or mortgage payments
- Enrollment status and anticipated date of graduation
- The loan amount you’re requesting
- Cosigner name and contact info, if applicable
| Tip: Unlike prequalification, a formal loan application will trigger a hard credit check. For this reason, it’s wise to only apply with your preferred lenders and limit your applications to a relatively short time span. Taking these steps will minimize any temporary harm to your credit score. |
If your application is approved, you’ll usually need to accept the loan and sign some final paperwork. From there, the lender will work with your school to confirm your enrollment details and send the money. Your school will apply the money to any unpaid balances; any remaining cash can then be distributed to you. (As with leftover federal loan funds, it’s always smart to return unused private loan dollars to your lender.)Â
Frequently asked questions
How do you qualify for student loans?
Exact eligibility requirements depend on the type of loan you apply for, though many lenders require you or your cosigner to be a U.S. citizen or eligible noncitizen, make satisfactory academic progress in school, and be enrolled in an eligible program at least half of the time.
Federal student loans also require you to fill out the FAFSA annually. Private student loans, on the other hand, generally have minimum credit scores and income requirements.
What disqualifies you from student loans?
This varies depending on whether you’re applying for private or federal student loans. For private loans, a low credit score, insufficient income, or a high debt-to-income ratio, among other reasons, could disqualify you from receiving funding.
As for federal student loans, you may be disqualified if…
- You don’t meet basic eligibility criteria
- You’re no longer enrolled in an eligible program
- Your existing student loans are in default
- Your status as an eligible noncitizen has expired
- You’re incarcerated
Can I apply for a student loan on my own?
It’s possible to get student loans on your own, but for young people without a strong credit history, federal loans are likely easier to qualify for. Federal loans aren’t based on your credit or income, and while you may need to provide a parent’s information on the FAFSA, your name will be the only one that appears on the loan.
For private student loans, whether you can secure funding alone depends on if you meet eligibility requirements outlined by the lender, such as having sufficient income and a high enough credit score. If not, a cosigner may be necessary. (Keep in mind that even if you can qualify on your own, a cosigner could help you access lower interest rates or additional repayment terms.)
How much income do you need for a student loan?
For federal student loans, there are no income requirements. Income minimums for private student loans vary by lender but can be as low as $24,000 annually.
Are there alternatives to student loans?
While student loans are usually the easiest way to borrow money for your education, taking on debt isn’t your best option. Alternatives to student loans include scholarships, grants, work-study programs, or income from a part-time job while you’re in school. Prioritize savings, earned income, or gift aid that doesn’t need to be repaid — or consider switching to a lower-cost school — before resorting to borrowing.