How To Apply For Student Loans- A Complete Guide

Nikhil Goswami

It’s a known fact that many students who go off to college cannot afford it on their own. While it might seem like a reasonable idea to work your way through college, it’s actually much easier said than done. This is largely because only a few students can earn enough every year to cover college costs while simultaneously completing their studies. 

For these reasons, among many others, student loans have grown incredibly popular over the years. Thankfully, applying for one is relatively easy with some guidance.

However, before diving right into the loan application process, you should understand a few things as this would likely be the first significant financial decision of your adult life. For starters, make sure you know everything there is to know about the lender and their terms and conditions before you actually take out the loan. 

The federal government, as well as private financial institutions like banks and credit unions, provide student loans. There are several benefits to federal loans, such as lower interest rates and longer repayment terms, when weighed against loans from commercial lenders. 

That said, the following steps detail how to apply for student loans:

1. Fill Out the Free Application for Federal Student Aid (FAFSA)

This is a worksheet that might assist you in determining the financial aid and student loans you are eligible for to attend college.

Among other things, the FAFSA enquires about the family’s finances. This includes information like whether or not more than one kid will be attending college simultaneously. The Free Application for Federal Student Aid calculates your Expected Family Contribution (EFC) based on the information you provide. For clarity, your EFC is how much money your family should be able to put aside for college expenses in the next academic year.

You can fill out the FAFSA form at the Federal Student Aid website. Before you begin, you’ll need to have several bits of relevant information ready. These include tax documents, SSN, records of investments and bank statements, among others. 

It’s worthy of note that the FAFSA form filling process needs to be repeated every year after your very first application and it needs to be done as soon as possible. However, after the first, subsequent applications are often a breeze for most students. 

On average, it takes about three to five days to process your FAFSA when completed online. If for any reason at all, you’d prefer to do it the old-fashioned way and submit a paper application via the mail, you’re free to do so. But, the processing time for this option is around seven to ten days.

The FAFSA form is free. As such, if anyone tries to charge you a fee to fill it out, that should be a huge red flag that something’s wrong.

Student Aid Report

After completing the FAFSA form, you will receive a Student Aid Report (SAR), which provides you with essential details on your eligibility for federal financial aid. You will not get an EFC in your SAR if your application is incomplete, but you will receive instructions on what you must do to fix any problems.

2. Compare Your Offers for Financial Aid

To assess your eligibility for federal student loans, grants, and work-study programs, the universities you listed on your FAFSA will have access to the information you provided.

Using that information, the ones where your student application was successful would determine precisely how much aid you can get by taking out your Expected Family Contribution from their Cost of Attendance (COA). For context, the cost of attendance at most colleges includes compulsory fees, tuition, accommodation, and a few other expenses. This is usually readily available on each university’s website. 

To cover the difference between your EFC (how much money you can afford to pay) and their COA (how much you need to pay), colleges would then create a financial aid package, which could include federal Pell Grants and/or a work-study program, tailored to your needs. 

That said, comparing award letters from different colleges is crucial since they might vary greatly. Evaluate the amount of money each institution is offering and whether loans are subsidized or unsubsidized. Also compare interest rates.

Subsidized Loans and Unsubsidized Loans

Direct Subsidized Loans: Like grants, subsidized loans for special financial needs are available directly from the federal government. Subsidized student loans benefit from having the U.S. Department of Education cover their interest. This lasts as long as you’re enrolled at least half-time and for the first six months following graduation.

Direct Unsubsidized Loans: These are federal student loans that don’t depend on how much money the student needs. Your school decides how much you can borrow based on how much it will cost you to attend school and how much other help you get. Interest accrues constantly, and unpaid interest may capitalize (add to the principal amount of a student loan) at certain times during the loan period. This may make your total loan cost go up.

Direct PLUS Loans: Federal loans provide various benefits over loans from private lenders, such as lower interest rates and a lower monthly payment. But you can only borrow so much money. Additionally, there are restrictions on the amount of money you may borrow throughout your academic career. That’s where Direct PLUS comes in. These are federal loans that parents of dependent students and graduate and professional students can get without help from the government. After you’ve used up all your other financial aid, PLUS loans can help pay for your college costs up to the cost of attendance. 

You don’t have to be poor to qualify, but you must undergo a credit check. Those who want to borrow money but have adverse credit history must meet more requirements. Interest always accrues, and it may capitalize at certain points during the loan period, raising the total cost of your loan.

3. Private Student Loans

Suppose you need to borrow more money than is available via federal student loans. In that case, you may consider applying for private student loans through a financial institution.

You do not need to demonstrate financial need to qualify for a private loan. Rather than the FAFSA, you will use the application papers provided by the lending organization. You will need a decent credit rating to get approval for private student loans. Otherwise, you will need someone with a good credit rating, like a parent or another relative, to cosign the loan.

When applying for student loans, having less than excellent credit might make the process more challenging. Private lenders will consider your income and credit history. Given that you are a student, you may have bad credit or none. Nevertheless, loan choices are available for students with poor credit from several different lenders.

Unlike government loans, interest for private student loans are often substantially higher. Furthermore, these rates tend to be variable rather than set, making it difficult to estimate how much you will ultimately have to repay. Private loans do not qualify for consolidation under the Federal Direct Consolidation Loan program. Therefore, borrowers of private student loans cannot take advantage of the federal government’s more flexible repayment options. However, if you wait until after you graduate to refinance your private student loans, you may be able to get a better interest rate.

At around the same time you get notification of your formal acceptance from each institution, you’ll also get an award letter informing you of how much aid each college is prepared to provide. In addition to financial assistance provided by the federal government, several schools and universities also provide scholarships based on academic achievement or athletic prowess.

4. Select Your School

This is perhaps one of the most important steps while applying for student loans. Once you’ve received a financial aid award letter from each college willing to accept you and offer financial assistance, take extra time to make your decision carefully. You already know all the basics that you need to consider, including the quality of the school, the opportunities it provides, etc. However, here, we’re speaking strictly with specific reference to financial aid awards.

The cost of attendance varies between institutions and, while your student loan might cover it, you don’t want to accumulate far more student loans than you can handle. Doing so will almost certainly have a negative impact on your life and career choices when you graduate. Unfortunately, things could still be significantly worse if you don’t end up graduating for whatever reason but you still have a considerable amount of debt to deal with.

So, even though student loans will make things easy for you in the short-term, consider the long-term financial commitments that they imply before you finally decide on a school to attend.

5. Entrance Counseling

If you have never taken out a loan before, your educational institution must provide you with entry counseling before issuing the first disbursement of your loan. The only exception to this rule is for parents who take out Direct PLUS loans for their children. With entrance counseling, you can better grasp your duties concerning your loans. This counseling session might be done in person at your school or you might be given a chance to do it virtually. The specifics are largely dependent on the school itself.

6. Loan Disbursement

With federal loans, the government will typically transfer the money to your school. They, in turn, will disburse it to you. Afterward, you can use the money to cover whatever academic costs you have that semester or session.

Factors You Should Consider While Applying For Student Loans 

Before you take out a loan, you should know that you are under a legal compulsion to pay back the money you receive, plus interest, no matter how long it takes. 

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As such, it would be best if you did not put off learning about the obligations you have as a borrower until after you graduate. Here are some vital things you must keep in mind whenever you’re taking out a federal student loan.

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Keep Track of How Much Money You’re Borrowing

Consider how much you owe in student loans and how much you can afford to pay back. After graduation, your student loan payments should only be a tiny fraction of your income. So, do not take out more debt than you need to cover your educational expenses. It should also go without saying that you must never borrow an amount of money you can’t repay.

If you really want to be a few steps ahead with regards to calculating how much you need to borrow, put a reasonable amount of thought into your career path. If you’re majoring in communication or marketing, for example, and you expect to land an entry-level marketing role after graduation, consider what the base income of that role is.

Feel free to ask your school for the entry-level salaries of recent graduates in your area of study. This will help you understand how much you may expect to earn after you finish your degree. As an alternative, you may use the Occupational Outlook Handbook. You may also use the United States Department of Labor career search tool to explore jobs and wages. These options are likely to be more accurate than random numbers pulled off the internet. 

It’s worthy of note that the information would probably be grossly inaccurate in a few years when you graduate. Plus, your circumstances would have certainly changed. But, you can get a broad range of what your projected income might be upon graduation. With that range, you should be able to figure out how much you’ll need to take out in loans based on the average or lowest possible income you might be earning upon graduation.

Familiarize Yourself With the Conditions of Your Loan

Keep a copy of all of your loan documentation and familiarize yourself with the conditions of your loan. The promissory note, for example, is a legal contract that compels you to pay back the debt if you fail to finish your studies, are unable to find employment after graduation, or just dislike your education.

Respect the Due Dates for Your Invoices

Even if you don’t get a bill, repayment notification, or reminder, you must still pay on time. Partial payments do not satisfy your duty to return your student loan on schedule. Hence, they are not usually permitted under your repayment plan.

Always Stay In Contact With Your Loan Servicing Company

You should report changes in your name, address, or Social Security Number to the company that manages your student loans. You should also contact your servicer if you’re experiencing problems paying your planned loan installments.


To qualify for a loan, the vast majority of students will need a cosigner who resides in the U.S. This is doubly true for international students. If the borrower cannot repay the debt, the law requires that the cosigner make the repayments. The cosigner needs to possess excellent credit and be a permanent resident of the United States. They must have also resided in the country for the previous two years. Most foreign students cannot secure credit in their own right. As such, the cosigner is often a close friend or family who can aid in the process of obtaining credit. If you are unable to locate a cosigner, check to see if there are any loans available that do not need one.


The interest is the amount of money the lender charges you in addition to the total sum you borrow. The interest rate is determined by taking an index and adding a margin to it. Your cosigner’s creditworthiness will determine the amount of the extra percentage rate of interest that the lender will add. 

The Prime Rate and the London Interbank Offered Rate (LIBOR) are the two indices foreign students use the most. This index is based on the federal funds rate, which the United States Federal Reserve establishes as the prime rate.

The London Interbank Offered Rate, sometimes known as LIBOR, is a benchmark interest rate that the London interbank market uses. It is derived from the British Bankers’ Association. This rate is an average of the interbank deposit rates for overnight and one-year periods offered by the world’s most creditworthy banks.

During the process of reviewing the loan, the lender will clarify which index the plan uses. After that, an extra margin will be applied depending on the borrower’s unique requirements, including the cosigner’s credit history. The lender will add an extra interest rate to the index, depending on the individual’s creditworthiness. This will be the entire amount of interest that is due from you. When your loan request is accepted, the particular margin that will apply to your loan will be communicated to you. At that time, you will have the option to either accept or decline the loan.


The terms of the repayment will be different for each of the available loan options. The vast majority of international students cannot hold jobs while pursuing their education in the United States. Hence, you need to be sure that the terms of your loan account for this reality. You will need to consider the amount of the monthly payments and when they will begin. You’ll also need to consider how long you will be able to put off paying back the loan. The payback duration typically falls anywhere between 10 and 25 years. The length of the repayment period is proportional to the size of the loan. The following kinds of payment schedules are considered to be standard:

Full Deferral: If students maintain their full-time status, they may put off making any payments on their student loans until six months after they have graduated. Students can postpone payments for up to four years, the average time it takes to get a degree.

Interest Only: This repayment plan allows students to pay only the interest on their student loans while enrolled in school (for a maximum of four years in a row). And they can put off paying the principal on their loans for up to 45 days after graduation or until they reduce their course load to part-time.

Immediate repayment: Whenever a loan is disbursed, the borrower is immediately responsible for making payments on both the interest and the principal balance of the loan.

How Federal Loans Compare to Private Loans

The biggest and most obvious difference between federal loans and private loans is that the former is provided by the government. The latter, however, is offered by credit unions, banks, and other financial institutions. The government often has several repayment options with the majority of their loans having fixed interest rates. This isn’t always the case with private loans as they often come with variable interest rates. What’s more, private lenders might be more inclined to do a credit check of the borrower and cosigner before determining eligibility for the loan. Finally, the maximum loan amount for private loans may be larger than the maximum amount for government loans.

Federal Student Loan Benefits

  • You Can Be Flexible: Although every student loan, whether federal or private, is a legal agreement and has to be repaid with interest, federal student loans often provide more adaptable repayment alternatives than private student loans do. For borrowers with federal student loans, for instance, the ability to modify repayment plans exists even after the funds have entered the borrower’s account (sent to your school).

There are a few reasons behind this. However, the most plausible is that private lenders are primarily in it as a business. Plus, they have more to lose from a business perspective if they don’t properly define their repayment terms and ensure compliance with whatever legal tool they have.

  • You May Set up a Payment Plan Depending on Your Monthly Income: Income-driven repayment plans, also known as income-based repayment plans, are available for some federal student loans. These plans limit payments depending on the borrower’s income and the number of people living in their household.
  • A Solid Credit Is Not Necessary to Qualify for Federal Student Loans: In contrast to private student loans, applicants for federal student loans do not need solid credit to get approval. This especially applies to students who just graduated high school but haven’t yet had time to establish their credit histories.
  • You Won’t Need a Cosigner for This Loan: Because the lender does not consider the borrower’s credit for most federal student loans, except Direct PLUS, it is not essential to apply with a cosigner for these loans.

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FAQs Regarding How To Apply For Student Loans

Do I qualify for Federal Student Aid?

To get federal student assistance, you must meet the following criteria:

  • Financial need
  • Being a U.S. citizen or a qualified noncitizen
  • Keeping your federal student loans in good standing
  • Enrolling in or being accepted into an academic program leading to a degree or certificate
  • Achieving the necessary academic advancement

2. What is the maximum federal student loan amount that I am eligible to borrow?

The total amount you may borrow depends on several factors. This includes the kind of loan you get, the year you entered school, and whether you are a dependent student. On average, undergraduates might be able to borrow up to $60,000 in total. Graduate students, on the other hand, might be able to borrow up to $140,000 in total. 

3. What should I expect to pay in interest for federal student loans?

Federal student loans often range anywhere between 4% – 8%. However, they’re not set in stone. Your number might be in the upper or lower end of the range, depending on your peculiar circumstance. 

Conclusion: How Do You Qualify For Student Loans?

One of the options for families looking for assistance in paying for college expenses is applying for a student loan. Both private and government loans offer benefits and drawbacks, depending on the individual borrower’s circumstances. 

You can also have a look at the best emergency loans to support your time at college. 

A credit check is necessary for private student loans, just like any other loan. These loans are often managed by financial institutions like banks and credit unions. Loans from the federal government often cater to borrowers depending on their level of financial need. Hence, they provide more favorable interest rates and payback terms. Those who make the necessary effort will discover great solutions to match their specific requirements.

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