How to Apply For a Student Loan (Federal and Private)

For many college students, there’s a gap between how much a degree costs and what they can afford. In the 2021-2022 academic year, 41% of American families participated in some type of borrowing to close this gap. Once you’ve maxed out your other financial aid, you may need to explore different types of student loans. The lingo around loan applications, interest rates, credit scores, and repayment plans can be confusing –– but applying for a student loan is easier than you think.

How do you apply for a federal student loan?

A federal student loan is a loan provided by the federal government. Federal loans carry fixed interest rates, borrower protections, flexible repayment options, and opportunities for student loan forgiveness.

There are various types of federal student loans available to U.S. citizens. Your eligibility will vary based on need, education level (if you’re an undergraduate or graduate student), and borrower type (if you or your parents will be taking out the loan). Most federal student loans carry maximum borrowing limits per year, per borrower. Ready to borrow a federal student loan? Take these steps.

1. Have an honest conversation about finances

Before you start applying for loans, talk to your parents or guardians about your family finances. Are they planning to contribute a portion of their income? Savings? If so, how much? Depending on their financial picture, they might not have the flexibility to put a significant amount of money toward your degree. Initiate an honest conversation before you complete the Free Application for Federal Student Aid (FAFSA®). It’s important to know the gap between how much you have and how much you’ll need to afford the college of your choosing.

2. Get organized

Gather all of the necessary information to complete your FAFSA®. Because the FAFSA® considers financial need, you’ll need financial documents like your family’s tax returns and bank account balances. You’ll also need personal details like your social security number.

3. Fill out your FAFSA®

To be considered for federal student loans, you need to complete the FAFSA®. The FAFSA® is a free application that captures your personal financial and family information. Once it’s submitted, your FAFSA® will be reviewed by the U.S. Department of Education to determine what type of federal financial aid you’re eligible for. It will also be sent to each college you apply to. There, it will be reviewed by the school’s financial aid office to determine what type of school-specific aid you’re eligible for on top of federal financial aid.

Remember – your aid does not roll over from year to year. So you’ll have to fill out the FAFSA® each year that you need financial aid. Mark your calendar for October 1st — that’s when the FAFSA® opens for applications each year*. Fill it out as close to October 1st as possible, because some aid is offered on a first-come, first-served basis.

*Due to federal changes, the 2024-2025 FAFSA® form opened on Dec 31, 2023.

4. Assess your financial aid award letter

Once your FAFSA® is processed, you’ll receive a financial aid award letter from each school you’ve applied to. This document details what you’re eligible for in grants, scholarships, and work-study. These are all funds for college that you won’t need to pay back. Additionally, the letter will tell you how much you’re being offered in federal student loans (money you will need to pay back, with interest). If you need extra help deciphering your offer, contact your school’s financial aid office.

There are a variety of types of federal student loans that you may see on your award letter:

Direct subsidized loan – For student borrowers, based on financial need
Direct unsubsidized loans – For student borrowers, not based on financial need
Direct PLUS loan – For graduate and professional student borrowers or parent borrowers on behalf of a dependent undergraduate student, not based on financial need

5. Determine how much aid you need

While your tuition price can give you a helpful ballpark number, determining the true cost of attendance is a bit more complicated. Factor in expenses like housing, food, transportation, books, and supplies. Calculate how much your college experience might cost and use that number to inform how much financial aid you’ll need.

Your financial aid award letter isn’t all you’ll need to take into account as you determine how to afford your degree. Have you won any private scholarships? Do you have 529 plan savings? Add up how much you intend to use from these funding sources and factor in your financial aid offer to determine how much more aid, if any, you might need.

6. Understand student loan repayment terms

One of the most advantageous features of federal student loans is the flexible repayment terms offered by the federal government. The federal government…

doesn’t require students to make loan payments while in school if they are enrolled at least half-time (known as in-school deferment)
generally offers a 6-month grace period after graduation before your first payment is due
offers protections like income-driven repayment, forbearance, and deferment
offers paths to loan forgiveness like PSLF

Though some private lenders may offer one or more of these programs, they are not required to.

7. Accept or reject your federal financial aid offer

Based on how much financial aid you need, either accept or reject your financial aid offer. If you don’t need all of the federal loans offered, you can accept some and reject others. If you have further questions on federal student loans, studentaid.gov offers countless resources that help students navigate the finer details borrowing and repaying.

How do you apply for a private student loan?

Private student loans are similar to federal student loans in that they provide money to help students and their families afford college¹. The primary distinction is that private student loans are disbursed by private lenders – financial institutions like credit unions, banks, and other private companies. If you have a gap between federal financial aid and your higher education costs, private student loans could be a great option. Here’s how to apply for a private student loan if your federal financial aid isn’t enough.

1. Determine how much you need

Once you’ve maxed out all of your federal student loans, determine how much extra money you’ll need to afford your degree. Try to identify the exact amount. You never want to borrow more than you need because you’ll be paying back your loan amount plus interest. The more you borrow, the more you’ll pay in principal and interest over the life of the loan.

2. Shop lenders

Another perk of private student loans is that you get to choose your lender. With more control over the borrowing process, you can find the lender that best suits your needs. Research different lenders. Make a spreadsheet and compare their products, rates, terms, etc. Next, start narrowing down your favorites. Here are a few areas to evaluate:

Reputation

Explore reputable websites that review lenders. Listen to what other loan borrowers have to say –– but remember that every student’s financial situation is unique. So, just because one lender is the most popular doesn’t mean they’ll be the best for you. Reach out to your school’s financial aid office to see if they recommend any preferred lenders.

Interest rates

The interest charged on your loan will have a major impact on the total amount you’ll repay over time. For example, a $50,000 loan with a 10-year term and a 10% fixed interest rate will result in a payment of $660.75 per month, totaling $29,290 paid in interest over the life of the loan*. On the other hand, that same 10-year, $50,000 loan with a fixed interest rate of 6% will result in monthly payments of $555.10, and cost you only $16,612 in interest over the loan term*. Even a few percentage points can make a major difference. The biggest factor in securing a good interest rate is a great credit history. If you’re an undergrad with little credit history, you can apply with a cosigner (more on that later).

*Rates, terms, and loan amounts above are for illustrative purposes only. For current Earnest rates, please visit www.earnest.com.

Repayment terms

The details around how you’ll pay back your loans can impact your ability to repay them in a timely manner (and your quality of life along the way). While many private lenders don’t offer the same repayment options as the federal government, some might provide borrower protections like forbearance. For each potential loan you’re exploring, find out what your repayment options will be.

3. Find a cosigner

To qualify for most private student loans, undergraduate students may need a cosigner. A cosigner is someone who promises to repay your loan if you can’t for any reason. Most cosigners are parents or guardians –– but don’t panic if your parents don’t meet the lender’s credit requirements or eligibility standards. Virtually any US citizen who is the age of majority in their state can be your cosigner. Explore other potential options — like a sibling, aunt, grandparent, or even a teacher.

4. Get prequalified

Many lenders allow potential borrowers to prequalify before submitting a formal application. When you get prequalified, lenders will run a soft credit check to determine your creditworthiness, which (unlike a hard credit check when you submit an official application) won’t affect your credit score. Then, they’ll let you know your likelihood of approval for the loan you want, and a range of interest rates you may be eligible for. To get prequalified, visit the website for each lender you’re considering.

5. Gather your documents

Like you did with your FAFSA®, gather your personal and financial documents for your loan application. Depending on the lender, you’ll need some or all of the below documents for both you and your cosigner:

Credit score report and credit history
Recent tax returns
Proof of income like a recent pay stub
Bank and investment account balances
Photo I.D., birth certificate, or social security card
Social security number

6. Apply

Once you have a list of finalists, submit a loan application via each lender’s website. At this point, the lender will run a hard credit check to determine your creditworthiness, which will hurt your credit score temporarily. To minimize the effect on your credit score, make sure you submit all your loan applications within a 14- to 45-day window. This is known as the “rate shopping window.” Credit bureaus consider shopping for interest rates financially responsible behavior, so as long as you submit all your applications within this window, all hard inquiries should only count as one hard inquiry.

Should I get a federal or private student loan?

When it comes to borrowing student loans, always max out federal direct loans first. Federal loans have the lowest interest rates for the majority of borrowers, the best borrower protections, and the most forgiving repayment options.

If you still need money after that, your next best options are direct PLUS loans or private student loans. Depending upon what you’re looking for and what type of borrower you are, each of these loan options has pros and cons.

When it comes to private student loans, Earnest is Going Merry’s trusted partner. With competitive interest rates, flexible repayment terms, no origination fees, and a 9-month grace period², it’s easy to see why Earnest was voted the best private student loan lender by US News³.If you’re shopping for private student loans, find out why over 5,000 customers rate Earnest a 5.0 on TrustPilot. Get a personalized rate check in less than two minutes. It won’t affect your credit score.

Get matched to scholarships with Going Merry

Student loans can help bridge the gap between your financial aid offers and the cost of tuition. With flexible repayment terms and low interest rates, student loan debt can be a worthwhile sacrifice – particularly if you’re pursuing a degree with substantial future earning potential.

Before you sign on the dotted line for a student loan, make sure you’ve thoroughly explored college scholarships. Going Merry curates only the most high-quality scholarship programs and sends them directly to you. Just create a profile and you’ll get matched to scholarships you’re already eligible for. From there, you can create shortlists, upload and save essays to reuse, and even apply to multiple scholarships all at once. Ready to get started? Sign up for Going Merry here.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if your struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.

2 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

3 According to the 2023-2024 U.S News and World Report on Banking, Investment Platforms & Lenders.

Earnest Private Student Loans are made by One American Bank, Member FDIC, or FinWise Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Finwise Bank, 756 East Winchester, Suite 100, Murray, UT 84107.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank, FinWise Bank, and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

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Going Merry is a one-stop shop for scholarships-- allowing students to find and apply for scholarships, right on our platform. It's like the best scholarship search engine, and an efficient scholarship application form, all in one. How does it work? You fill out a profile, get matched to scholarships you're eligible for, and then can filter or favorite scholarships into an application shortlist. Then, when you're ready to apply, our platform auto-fills any information you've already told us, so that you never have to answer the same thing twice. Counselors often call us the "common app for scholarships."