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How to Apply for Student Loans: Your Guide

You’ve been accepted into college and you’re excited about it! But now you have to figure out how to pay for it and you’re a little less excited about that. 

You’re not alone. Most new students face the burden of college prices and may not be all that sure about what to do next. We want you to know that you have many options available to help you afford your education. And we’re here to help you navigate the various systems to get that help. 

First, what about loans? There are four main kinds of student loans: federal subsidized loans, federal unsubsidized loans, PLUS loans and private loans. The most common way students borrow for college is through the three federal student loan programs. However, if the federal student loans aren’t enough to cover the cost, you can always apply for additional private student loans. 

But how do you actually go about applying for these student loans? And what should you know or do first? We’ll explore these and other questions as you learn about the steps to apply for federal and private student loans.

Step 1: What Financial Aid Can I Get?

While student loans may be the first option that comes to mind when you think of paying for college, they’re not the only option.

Before you even consider applying for loans, you should review free private and public financial aid options. Your college’s financial aid office is a great place to start your search. Educational financial opportunities like scholarships, grants and work-study programs put money towards your education that you won’t have to pay back later.

But don’t hesitate to widen your search to community organizations, your parent or guardians’ employers, and state and federal grant agencies. 


Scholarship opportunities are available for just about every student. Many of these scholarships are broad and anyone can apply, but others may have specific requirements. Look for essay contests, profession-specific scholarships and community organizations that provide scholarships to members. Scholarships can be need or merit based.

You should also review your school’s site for institutional scholarships you may automatically qualify for based on grades or other requirements. 

Any scholarship, however small or large, can reduce your future student loan debt. That means more money in your pocket that you can save instead, or spend on other things!


Grants are similar to scholarships, but tend to be based on demonstrated financial need. The U.S. Department of Education (ED) has a handful of grants you can apply for. You can also seek out state grants or even private grants through your school or a variety of organizations.

Grants can be paid out, or disbursed, in multiple ways, depending on the type of grant. Usually, the grant programs will pay your school directly for a portion of your tuition or room and board. However, some grants permit students to request the amount as a check they can apply toward other school or living expenses. 

Work-study programs

Schools also offer federal work-study programs to students. These programs provide part-time jobs at the school to help students earn money to put towards their education or living expenses. 

A federal work-study program can be a great way for you to gain valuable work experience (and some cold, hard cash) while you’re enrolled in school. You’ll only be able to earn up to the dollar amount awarded in your financial aid package. And you’ll have to make time in your study schedule to work. But if you’re in a position to balance work and school, this can be a helpful option. 

Step 2: How Much Can I Borrow? 

Now that we’ve shown you some other options, it’s time to start thinking about how much you can actually borrow. There are two sides of this decision: how much you need to borrow and how much you’re eligible to borrow.

In general, it’s best not to borrow more than you need to cover the costs of college, so you don’t carry more student debt than you have to. Each federal direct loan program has a cap on how much you can borrow, which we’ll explain in the following sections. 

It’s important to note that whatever you borrow is subject to compound interest during the life of the loan. Compound interest is when the interest your loan accumulates is added to the balance of the loan, which then earns more interest. Essentially, the interest compounds more interest. This means that your loan amount will grow exponentially over the years. 

Federal student loan options

Let’s take a look at the most common type of student loan debt: federal direct student loans. Federal loans are funded by the ED to help students afford tuition. 

There are a few different types of federal student loans, each of which has different terms, interest rates and eligibility requirements.

Direct subsidized loans

Subsidized federal direct student loans help cover the cost of college for undergraduate students who show financial need. They’re considered subsidized loans, because the ED covers the interest on the loan while the borrower is enrolled at least half-time. The ED also pays loan interest for 6 months after the borrower leaves school (grace period), and during any periods of deferment.

You can borrow between $3,500 and $5,500 a year depending on whether you’re a dependent or independent student (according to several factors you’ll report on the FAFSA), and your academic year.[1]

The 2022 – 2023 interest rate for subsidized loans is 4.99%.[2] However, interest and payments are currently deferred until until August 31, 2023 or 60 days after the student loan debt relief program litigation is resolved, whichever comes first.[3]

Direct unsubsidized loans

Unsubsidized federal direct student loans help cover the cost of college for undergraduate and graduate students. Unlike their subsidized counterpart, direct unsubsidized loans don’t consider financial need a requirement for eligibility. Any undergraduate or graduate student can qualify for this loan type. 

You can borrow between $5,500 and $12,500 a year depending on whether you’re a dependent or independent student (according to several factors you’ll report on the FAFSA) and your academic year.[1]The 2023 interest rate for subsidized loans is 6.54%.[2] As with subsidized loans, the interest and payments are currently deferred August 31, 2023.[3]

PLUS Loans

Direct PLUS loans are divided into two categories: the Parent PLUS loan and the Graduate PLUS loan. Under the PLUS loan programs, parents or guardians of dependent undergraduate students or graduate students themselves can take out loans based on financial need.

PLUS loans allow graduate students and parents or guardians to borrow up to the full cost of attendance after other financial aid has been exhausted.[4]

The 2022 – 2023 interest rate for subsidized loans is 7.54%.[2] However, like both Stafford loans, the interest and payments are currently deferred until August 31, 2023.[3]

Step 3: What Do I Need To Have Before Applying for Federal Student Aid?

The Free Application for Federal Student Aid (FAFSA) is the only way to apply for federal student loans. You’ll need to have a few documents on hand before you fill out the FAFSA form. If a parent or guardian claims you as a dependent, you’ll also need their copies of these documents as well. Here’s a list of what you’ll need when you fill out the FAFSA:

  • An FSA ID – You get this by creating an FSA account before you fill out the FAFSA
  • Social Security Number (or Alien Registration Number)
  • Tax returns and W-2s
  • Bank statements

Step 4: How Do I Apply for FAFSA?

Anyone can apply for federal student aid by filling out the FAFSA form. You can fill out the FAFSA online in an afternoon or an evening, if you have all the necessary documentation on-hand. It’s a rather comprehensive form and will ask for all your financial information. 

To qualify for federal student aid for the upcoming academic year, the FAFSA must be completed by June 30.[5] However, states and schools can have their own deadlines as well, so if you’re hoping to get other forms of financial aid, look into their deadlines.

When you file your FAFSA, your Student Aid Index (SAI) is calculated and can be found on the first page of your Student Aid Report. The SAI is also commonly referred to as the Estimated Family Contribution (EFC).

This number calculates how much financial aid you’re eligible to receive, determines your eligibility for grants like the Pell Grant and is shared with your college or university. It’s based on your and your parent’s (or guardian’s) income and financial situation, if the FAFSA determines that you are a dependent student.

Note: Some schools also require you to fill out the CSS profile, a similar form to the FAFSA that exclusively helps private schools determine financial aid eligibility. If you’re attending a participating private school, fill this out when you fill out the FAFSA, since both need much of the same financial information.  

Step 5: What’s Next After Getting My Financial Aid Award Letter?

Once you get the financial aid award letter from your school, it’s time to evaluate your options. Look at how much they’re offering you in scholarships, grants, work-study and federal loans. 

Each of these will be disbursed directly to your school to go towards tuition, unless they’re specifically for other academic or living costs like books.  

Once you’ve looked over your financial aid award letter and decided what you’re going to accept, you’ll have to formally agree to your student loans. The Master Promissory Note is a form you’ll have to fill out when you get a student loan for the first time, saying you’ve read and agreed to the loan terms and plan to pay them back. 

Step 6: How Do I Apply for Private Student Loans?

If your financial aid award letter doesn’t cover the cost of your academic career, then you may consider turning to private loans. Private student loans operate differently than federal loans in a few notable ways:

  • They’re not need-based
  • They generally accumulate interest during your time at school
  • They disburse the funds directly to you and you pay the school
  • They tend to have stricter repayment options than federal student loan programs
  • You’ll need to apply to private lenders rather than using the FAFSA or CSS profile

You’ll need a lot of similar financial information to apply to private student loans as you did when you filled out the FAFSA, and a few additional documents. 

Private lenders rely on your credit score and debt to income ratio (DTI) when determining your eligibility for student loans. If you’re concerned that you have low or no credit, you can always ask someone with a strong credit score to co-sign your loan for you. Parents often co-sign on educational loans for their children.

Step 7: How Do I Compare and Decide What Loans Are Best for Me?

Ok, at this point you’ve done a lot of work and it’s time to assess and decide. Once you’ve applied for scholarships, grants and work-study programs, received your financial aid letter and looked at private loans, you should take stock of your financial situation. 

Look at all sides of your financial situation before you agree to borrow any student loans, whether private or federal. Consider the projected institutional cost, then figure out how much you can afford to pay up front. That amount will depend largely on your current financial situation and if you have any financial support from family. Then you’ll have a much better notion of how much of your educational funding will come from loans.

Once you’ve decided how much you need to borrow, then look at the federal and private loan terms. The interest rate and repayment terms should be your deciding factors when it comes to which ones you’ll accept. Federal student loans tend to have much better interest rates and more forgiving repayment options. 

Keep in mind that you’ll have to start paying back your student loans after you graduate or drop below half-time enrollment (with a 6-month grace period). So look at the repayment schedule and compare it to your projected income in your career field. Will the payments be affordable?

Get The Financial Aid That’s Right for Your Future

Applying for student loans is a straightforward process that’s worth every minute of your time. 

While the FAFSA determines how much you’re eligible to borrow in the form of federal student loans, you have other options. Be sure to research scholarships, grants, work-study programs and private loans. 

Then put in the work, apply, and borrow the amount that’s realistic for you. 

The Short Version

  • There are four main kinds of student loans: federal subsidized loans, federal unsubsidized loans, PLUS loans and private loans
  • The most common way students borrow for college is through the federal student loan programs
  • PLUS loans allow graduate students and parents or guardians to borrow up to the full cost of attendance after other financial aid has been exhausted
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  1. Federal Student Aid. “Subsidized and Unsubsidized Loans.” Retrieved February 2022 from https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized

  2. Federal Student Aid. “Understand how interest is calculated and what fees are associated with your federal student loan.” Retrieved February 2022 from https://studentaid.gov/understand-aid/types/loans/interest-rates

  3. U.S. Department of Education. “COVID-19 Emergency Relief and Federal Student Aid. Retrieved January 2023 from https://studentaid.gov/announcements-events/covid-19

  4. Federal Student Aid. “PLUS Loans.” Retrieved February 2022 from https://studentaid.gov/understand-aid/types/loans/plus

  5. Federal Student Aid. “FAFSA® Deadlines” Retrieved February 2022 from https://studentaid.gov/apply-for-aid/fafsa/fafsa-deadlines

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