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How to Apply for Student Loans: Federal and Private
If you are a student paying for college, you will probably come across student loans. There are two main types of student loans that you need to know about: federal student loans and private student loans.
Even within these two categories of student loans, you will encounter different interest rates, terms, and repayment options. On top of this every family’s financial situation is different and some loans may make more (or less sense).
Jump ahead to:
- Federal student loans
- How to apply for federal student loans
- Private student loans
- How to apply for private student loans
- Frequently asked questions about applying for student loans
Keep on reading to learn about how to apply for both federal and private student loans. If you are looking for more information on specific student loans and lenders, check out our list of best student loans.
Start with federal student loans
We recommend that students should start their student loan search by taking out federal student loans. Federal student loans are loans from the government and made directly to students. These loans require no payments as long as the student is enrolled in school at least halftime.
These student loans tend to have more favorable interest rates and repayment plans. In fact, some federal loans are “subsidized” which means that your student loan interest is paid by the US Department of Education when you are in school, a period of deferment, and in a post-graduate grace period.
See also: Subsidized vs. Unsubsidized Student Loans: What you need to know
Federal student loans include the following types of sub-loan types:
- Federal Stafford loans or Direct Stafford Loans, which can be subsidized or unsubsidized. Both types of Stafford loans accrue interest when you are in college, but with Subsidized Stafford Loans, the government pays the interest while you are in school. Learn more about subsidized and unsubsidized Direct Stafford Loans.
- PLUS loans or Parent Loans for Undergraduate students. These PLUS loans can help pay for the cost of attending a college that is not covered by their child’s financial aid package. Parent PLUS loans can range up to the full cost of attendance. It should be noted that these loans are the financial responsibility of the parent, not the student. PLUS loans typically have the highest interest rates among all of the federal student loans available to students. Learn more about Direct PLUS Loans.
- Federal Perkins Loans were subsidized loans with interest rates fixed at 5%. However, these loans were phased out in 2017 when the Federal Perkins Loan program expired and was not renewed by the government.
How to apply for federal student loans
In order to apply for all federal student loans, students must submit the Free Application for Federal Student Aid or FAFSA. One of the biggest misconceptions about the FAFSA is that it is only for need-based financial aid grants. However, students who do not qualify for need-based grants can still be eligible for federal student loans.
Students can apply to the FAFSA starting on October 1st as the FAFSA is based on prior-prior year tax information (so students in the high school class of 2021 would use tax information in the fiscal year in 2019). Note that students who are receiving any aid or student loans from the FAFSA will need to renew the FAFSA application again every year.
Applying for federal student loans is straightforward because the rates are determined by the government each year. We always recommend taking out the minimum number of student loans that you need. You should always take out subsidized loans first and PLUS loans should be a last resort as they typically have higher interest rates.
Private Student Loans
Private student loans are typically the final type of loan families will look at (they are also called “alternative student loans”). If you are in a situation where federal/institutional loans and grants are not enough, private student loans are a way to bridge the gap. It is not uncommon for private student loans to have more favorable interest rates than some federal student loans. Either students or parents can take out private student loans.
The downside is that private student loans lack the favorable terms that federal student loans have. For example, when the Department of Education recently suspended student loan payments and interest, only federal student loans were included.
How to apply for private student loans
Unlike federal student loans, you can apply for private student loans at many different types of financial institutions. This means that it is important to shop around to find the best rate of interest. While federal student loans have specific timelines and deadlines, there are no such timelines with private student loans. Instead, students can apply for these loans at any point in time.
Researching private student loans
To research the best private student loan rates we recommend utilizing a private student loan marketplace to search, compare, and apply to the best private student loan for you.
Below you’ll find out more information about these student loan marketplaces including the specific lenders that you can access through each marketplace. Our recommended private student loan marketplaces are:
- Credible – Offers actual rates (not just estimates), customer support 7 days a week, and 3-way phone support connecting you and lenders.
- PrivateStudentLoans.com – The student loan platform founded by Edvisors that also helps educate you on college financing options with articles and a podcast.
- SimpleTuition – The student loan platform founded by LendingTree, America’s largest online lending marketplace.
You can search these marketplaces in only a few minutes to learn about the rates that you qualify for. There is also no credit check when researching student loans through these tools.
This is an extremely important step if you are considering private student loans as it allows you to easily shop around for the best loan terms and rates.
Private Student Loan Applications
Once you select the best student loan option for you, you will need to formally apply for the loan. If possible, apply for private student loans with a cosigner to receive the most favorable rate. Typically, you would chose your parent or guardian as a cosigner. Before you start your application, you and your cosigner (if you’re using one) should have the following materials handy:
- Personal information and contact information
- Social Security Numbers
- Copy of your most recent tax return
- Employment documentation such as a recent paystub
