How to apply for student loans — federal and private

The student loan application process varies by loan type.  (iStock)

Paying for college is hard. In fact, according to the National Center for Education Statistics, tuition has jumped 31 percent at public institutions since 2006, and the average college student pays between $17,000 and $25,000 per year just to attend school.

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If you’re going to need student loans to cover the rising costs of higher education, you have options.

Scholarships and grants are obviously viable. But if you need additional financing, there are two types of student loans to consider: federal ones and private ones. Federal loans, as the name suggests, come from the federal government, while private loans you’ll get from a bank, credit union or other financial institution.


The student loan application process will vary based on which route you choose. If you’re like many students, you may need both private and federal loans to cover the costs of your higher education.

The student loan application process for federal loans

Federal loans, like Stafford Loans, Perkins Loans or Direct PLUS Loans, are typically your best option for covering college costs. These come with flexible interest options (some don’t acquire interest the entire time you’re in school), and they offer lots of perks like grace periods, deferment if you’re unemployed, income-based payment plans, and even total loan forgiveness if you go into public service after graduation. There are even Parent loans if your mom or dad wants to help shoulder some financial burden.

To apply for any federal loans, you’ll need to fill out the Free Application for Federal Student Aid, or FAFSA. Here’s what the process looks like:

A nice bonus with FAFSA is that it also functions as an application for federal grants — which are funds you don’t have to pay back (or pay interest on). Some commonly used federal grants include Pell Grants and TEACH Grants.

The student loan application process for private loans

If you’ve maxed out your federal loan options or you just need additional funding, you can then consider private student loans, which you’d get from a bank or lender.

The thing to note here is that private loans are credit-based, which has its pros and cons. On the good side, there’s a chance you might get a better interest rate than you would on a federal loan. The downside? You (or mom and dad) will need to have a stellar credit history to secure it. Usually, private loans don’t come with the same perks as federal loans, either (like income-based repayment plans, interest grace periods and more).

Here’s what the general process looks like for private student loans:

  • Find a bank or financial institution that offers student loans. Many banks, credit unions, and even online lenders offer them. Check your personal bank first.
  • Gather up your financial details. This includes household income, recent tax returns, bank statements and info about your assets.
  • Fill out the lender’s online application. Fill out the application (if one is available) or get in touch with a loan officer to get started. You will also need to fill out a Private Education Loan Application Self-Certification form and submit it to your lender.
  • Agree to a credit check. If your parents or someone else is co-signing your loan, they will need to submit to a credit check as well.
  • Await your results. Once the lender evaluates your credit and application, they’ll determine how much you’re eligible to borrow and at what terms. You can then accept or deny the offer. If you accept, the loan proceeds will go to your school, which will put them towards your account.

If you’re an undergraduate or just have sparse credit, you can generally expect to need a co-signer for any private student loan. Just make sure you choose someone who’s financially responsible and has good credit.

Proceed with Caution

Any time you take out debt, you should proceed slowly and only take out what you need. If you’re opting for federal loans, try for direct subsidized ones first, as these won’t accrue interest while you’re still in school (unsubsidized ones will).

And if you’re using private loans, be sure to shop around before choosing your lender. Rates and terms vary from place to place, so just a few extra quotes could save you significantly in the long run.

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