The Complete Guide on How to Apply for Student Loans

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Kristen Kuchar

By Kristen Kuchar

July 6, 2022

Student loans can help you pay for college, but they can also lead to trouble if you’re not careful. Too much debt can hold you back from meeting your financial goals and could delay important life milestones. It’s important to learn how to apply for a student loan, with or without your parents that will help set you up for future success.

This student loan guide will walk you through the process of how to borrow smart for college.

How to Apply for Student Loans: Step-by-Step Guide

1. Determine How Much to Borrow

Student loans must be repaid with interest. Because of this, you’ll want to keep the amount you borrow to a minimum. Before you start your loan application, determine how much you can really afford.

Experts recommend saving for at least one-third of future college costs, and covering the remaining two-thirds with current income (such as scholarships) and student loans.

If you don’t have enough in savings, you might be tempted to fill the entire gap with student loans. But, remember to give yourself limits.

Aim to keep your total student loan debt below your expected starting salary after graduation. This will help keep your debt manageable so that you can realistically pay off the balance within a standard 10-year repayment plan.

Our loan calculator can help you estimate your monthly payment based on the loan amount, interest rate, loan fees and loan repayment term you input.

2. Fill Out the FAFSA to Apply for a Federal Student Loan

First, you need to learn how to apply for federal student loans.. Start by filing the Free Application for Federal Student Aid (FAFSA). The federal government uses the FAFSA to determine your eligibility for need-based federal aid.

You can file the FAFSA as early as October 1 of the year before you enter college. Some financial aid is awarded on a first-come, first served basis, so it’s important to file as soon as possible. You can access the FAFSA online or with the myStudentAid mobile app. Remember to fill out and submit the FAFSA as soon as possible to maximize your chances of getting the most aid.

The FAFSA will determine the financial aid amount you are eligible for in an academic year. This includes need-based aid, like grants and federal student aid. Colleges also use information from the FAFSA to award institutional scholarships. Students should file a FAFSA for every year they attend college.

In addition to the FAFSA, be sure to apply for as many scholarships as you can. There are many free tools online that can help match you with possible opportunities.

3. Understand How Student Loans Work

Before you apply for a student loan, you should completely understand the requirements, how the student loan process works and what it really means to be in debt.

Most students borrow money for college from the government or from a private lender. In either case, the borrower typically has to sign some form of loan agreement that acknowledges the loan repayment terms.

With federal student loans, this agreement is called a Master Promissory Note. This confirms that you legally agree to pay back the loan, along with any interest and fees, no matter what.

Borrowers who don’t repay their student loans may face harsh consequences, such as wage garnishment, suspension of professional licenses and a lower credit score. However, federal borrowers may be eligible for flexible payment plans or forbearance during times of unemployment.

Private student loans are a different story. If you can’t make your private student loan payments, you may not have the option to postpone or lower payments through deferment or forbearance. You won’t have the option for forgiveness, either. This includes Public Service Loan Forgiveness.

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4. Compare Federal Student Loan Offers

Once you complete and submit the FAFSA, the next step is to wait for financial aid award letters from the colleges you applied to. The letters will include a list of the federal financial aid you are eligible for. For example, your award may include the following types of need-based aid:

  • Federal Direct Stafford Loan
  • Federal PLUS Loan (education loans for graduate students and parents)
  • Perkins Loan
  • Parent PLUS Loan
  • Grad PLUS Loan
  • Grants
  • Work-Study Programs

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6. Apply for Private Student Loans

After you learn how to get a federal student loan, private student loans are your next step. You can apply for private student loans and private parent loans through private lenders like banks, credit unions, or online lenders, which are outside of the government.

It’s important to research your options to make sure you’re getting the lowest interest rate. You’ll also want to compare things like eligibility requirements, fees and other features.

Private lenders are looking for creditworthy borrowers. This means the lender will review your income, credit history, debt-to-income ratio, and length of employment. Most students—including 90% of undergraduates and two-thirds of graduate students—will need a cosigner to qualify. Also, you won’t need the FAFSA to apply for private student loans.

But before applying for private student loans, you should consider the risks. These loans don’t offer the same perks of protections as federal loans. The government won’t pay for your interest while you’re still in school—unlike federal Direct Subsidized Loans. And once you graduate from school, you won’t have access to federal income-driven repayment plans. 

If you can’t make your student loan payments, you may not have the option to postpone or lower payments through deferment or forbearance. Your private student loans won’t have an option for student loan forgiveness, either. This includes Public Service Loan Forgiveness, a program only available for federal loans. Federal loans also offer more generous deferment options in times of unemployment or economic hardship. 

Private loans may require a cosigner if you have a limited credit history (which most students do). Your cosigner should be an adult you know and trust, such as a close friend or family member. By agreeing to cosign your private loan, this person will become equally responsible for paying back the debt. That means if you miss payments or go into default it will affect their credit, too.

Once you find a cosigner, be sure to have their information handy when you complete your application.

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Tips Before Applying for a Student Loan

Applying for student loans can feel intimidating at first. Here are some helpful tips to make the process easier and increase your chances of acceptance: 

  • Find a cosigner
  • Improve your credit
  • Apply early
  • Compare offers
  • Talk to an academic advisor for advice

Federal Student Loans Versus Private Student Loans

Federal student loans are made by the U.S. government. A federal loan, such as federal direct loan, will have a lower interest rate than a private loan. Federal loans also typically offer more favorable terms, flexible repayment plans and loan forgiveness options.

When a borrower exhausts their college savings and they reach their federal student loan limits, they may turn to private student loans to help cover the remaining costs. Here are some key differences between a federal student loan and a private student loan:

Interest rates

Congress sets the interest rates for federal student loans, which are typically lower than interest rates for private student loans. Private student loan interest rates are set by the lender, and are based on the borrower’s credit worthiness. These loans may have a variable interest rate or a fixed interest rate. Variable rates may start out lower, but they will fluctuate over time based on economic conditions.


Just about anyone can get a federal direct student loan. The Department of Education requires a credit check for federal PLUS loans, but you may still be able to qualify even if you have an adverse credit history. Private student loans, on the other hand, always require a credit check and may also require a cosigner if you don’t have establish credit.

Some federal loans, such as a direct subsidized loan, are based on financial need. Other federal student loans, such as a federal direct unsubsidized loan, are not based on financial need, but there are limits as to how much you can borrow. Private student loans are not based on financial need.


The only way to get a federal student loan is to file the FAFSA and select an option from your financial aid award letter. Borrowers must submit the FAFSA by a certain deadline for each year that they need help paying for college. But, you can apply for a private student loan at any time throughout the year.


With a federal loan, you are borrowing money from the government. However, once the government disburses the funds they will assign the loan to a loan servicer to manage the account. The loan servicer is who you would contact if you wanted to change your repayment plan, apply for forbearance or deferment or update your contact information.


You can refinance a private student loan to another private student loan with a lower interest rate or a better repayment term. You can’t, however, refinance a federal student loan into another federal student loan. That means once you refinance a federal student loan, you give up government benefits like student loan forgiveness options. To keep your federal benefits, you might consider consolidating your loans into a direct consolidation loan.

Our Loan Comparison Calculator lets you compare two or more different loans, identifying which loan offers a lower monthly payment and which one offers a lower total cost.

What Can You Pay for With Student Loans?

Your total college costs will include much more than just tuition. Room and board alone could easily cost over $10,000, and that doesn’t include transportation, books and “fun money”. But, can you use your student loans to pay for housing and living expenses?

You can use your student loans to pay for school-certified education expenses, which includes most living expenses. This includes tuition, fees, books, room and board, study abroad and computers. Costs of food, transportation, health care and child care are also eligible. It’s important to stick to these essentials so that you don’t end up taking on excessive debt.

If you end up borrowing more than you need, you can return your unused student loans. Remember, every dollar you borrow will likely cost about two dollars once you pay it back.

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It’s important to understand how student loans work before you apply, so that don’t end up with too much debt. Student loans are a big responsibility, but if you borrow smart they can help set you up for future success. Before starting the process, jot down the key deadlines.

If you begin early enough, you can avoid scrambling to finish everything on time. The most important deadlines are for filing the FAFSA. If you miss them, you won’t be eligible for federal student aid, including federal student loans, for a year.

A good place to start:

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