How to Apply for Student Loans — Federal and Private

The financial aid package your school sends you when you apply for aid will also contain the options for loans. Student loans can be of two types, i.e., federal and private. When the federal government lends you the money to complete your studies, the loan is federal in nature. They are further classified into student and parent types. On the other hand, if your lender happens to be the school, a state agency, credit union, or a bank, you are taking out a private student loan.


Several types of loans are available to you via the federal government. The one you go for will depend on the level of education you intend to tackle and the extent of your financial need.

Direct Subsidized

Once you successfully demonstrate financial need that satisfies the federal regulations, you may be approved for a no-interest loan. You’ll have to make sure you meet certain conditions and avail benefits, such as:

  1. Remain an undergraduate who goes to school for at least half the time
  2. Postpone your payments temporarily due to a deferment
  3. Avail a grace period—of six months—before you begin paying back after you graduate

Direct Unsubsidized

Since these don’t depend on whether a student has financial need or not, your school will decide how much you may borrow. They will look at the cost you will incur while attending school, and if you have other financial aid avenues. There is interest, though – which will be capitalized throughout the duration of repayment, including grace and deferment periods.

Direct PLUS Loans

Like the previous type, this unsubsidized loan is not need-based. Your school decides the amount on the basis of the cost of attendance. Interest will be charged throughout the duration. The only difference is that these student loans are given to parents of dependent students.

One great thing about a federal student loan is that it doesn’t really focus on your credit history!

Other Important Details about Federal Loans

  1. Why consider them?

Compare them with any private loan out there, and you will see a drastic difference between features like interest rates and repayment options.

  1. How can you apply for one?

You may fill the FAFSA on the government site, which will make you eligible for all federal student loans. It will also open the way for you to other opportunities, such as federal grants, scholarships, and work-study programs.

  1. How much can I borrow?

As mentioned above, since there are various types of loans, the amount will vary for each. Generally, though, you can expect the type of your loan, your year in school, and your status as a dependent student as opposed to an independent student, to affect the amount. Moreover, the government limits how much money they loan to a student throughout their stint in higher education. So, for graduate borrowers, the money borrowed as an undergraduate will also be counted!

  1. What interest rate should I expect?

The rates will vary every year since the Congress sets them afresh. However, you will have the advantage of paying new rates only if you take out new loans. For the older ones, you continue to pay a locked interest rate.


Should you not qualify for a federal loan or have exhausted your borrowing limit with them, you will have to turn to private loans. While they are reviled often by almost every financial advisor or expert, you may be out of options! But private loans are great in the sense that you have fewer restrictions on the money you borrow. You may use it to take bar preparation courses, for instance. Or, cover your residency-related expenses with the loan money.

Other Important Details about Private Loans

  1. Why should I consider them?

Private loans are also go-to loans for students who want to avail a non-accredited educational opportunity. If you want to attend a coding bootcamp, you won’t get a federal loan for that. Another situation that is suitable for private loans is when you don’t intend to spend half your time in school. Instead, you will take a course at a time. Not being a U.S. citizen would mean that you won’t qualify for federal loans either.

  1. What will I need?

For any loan, even the private ones, you need documentation that proves you have a source of income, shows your credit score, and any assets if you have them. So, prepare the following:

  • Tax returns
  • Cosigner’s information (if there is one)
  • Pay stubs
  • Cost of attending information about the school (if you will attend one)
  • Personal identification, such as driver’s license
  • Bank statements
  1. What is my next step?

It is time you went shopping for loans! Check out this list of best lenders for this year and match their rates with what is affordable for you. When you pick a lender that doesn’t ask for a hard credit pull, you can preview their rates for an idea. If you don’t find any, head to an aggregation site that allows you to compare interest rates and terms. Credible is a good example, but there are others too.

  1. How many lenders do I send my application to?

The answer may surprise students, but we recommend applying to two at least – with identical loans. When the lender calls back with the results of the approval process and underwriting completion, you can pick the best option out of the two.

  1. Do I need to know anything else before I sign?

Yes! As per recommendation, you’d have a few loan offers in front of you. Don’t just compare them with each other. Go through each once more and read all the terms in the contract. We’ll tell you why. Some lenders require you begin your payments immediately. Remaining unaware of that up to the last second won’t be a smart idea. Would it? Double-check everything before you commit.

Vacillating about which loan option to pick? Then talk to us, and we’ll get you sorted right away!

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