How to Apply for Student Loans

As the price of college tuition continues to rise higher and higher, borrowing money is sometimes the only way to pay for school. But there can be a lot to navigate such as deciding between public or private student loans, subsidized or unsubsidized loans, or understanding the difference between loans and grants and how it affects your applications. We’ll walk you through all of these so that you can decipher what you’re reading and apply for the type of student loan that best suits your needs.

Differences in applying for Federal Student Loans vs. Private Student Loans

Federal student loans are issued by the government through the U.S. Department of Education.  The application process for federal loans is entirely unique from other types of loans because applicants don’t need good credit to qualify for federal student loans. In fact, they don’t need any credit to qualify at all. Instead, loan eligibility is based on financial need and the interest rates are set and fixed each year, meaning everyone will be offered the same interest rate. Applying for federal student loans requires filling out a FAFSA (Free Application for Student Aid) form.

Private student loans, on the other hand, are offered through institutions like banks and credit unions which can impose any criteria they wish and charge interest rates at their own discretion. In these instances, your (or most likely your parents‘) credit is going to be the determining factor of how much you can borrow and at what rate. Applying for these types of loans involves applying directly with the institution you’re seeking to borrow from. Requirements and the process may vary by lender.

Why might someone choose private loans over federal ones? Despite lacking the protections and graces of student loans like deferment and income-based payment plans, many people turn to private loans when they don’t qualify for enough for federal ones since private loans tend to have higher loan limits. And if you or your cosigner has fantastic credit, you may be able to qualify for a great interest rate that could end up being lower than federal student loan rates.

Applying for federal student loans: Filling out FAFSA

Students must submit a FAFSA form to apply for federal student loans and must reapply every year until graduating.  This form asks for basic information like household income and size to determine eligibility for financial aid from your intended university school as well as potentially from the state. Some private lenders may also use this information to qualify you for a loan.

FAFSA is always free to submit. However, the application opens the year before the funding is needed and will need to be submitted before the start of the academic year. This year, the FAFSA form to acquire funding for the 2024  academic school year can be submitted from October 1 – June 30 (but you have until September 10^th to make corrections or updates). Be aware that each college as well as each state can set its own FAFSA deadline and may also require a College Scholarship Service (CSS) Profile, which we’ll go into more detail about below.

Last year, three-quarters of a million high school students left about $3.75 billion in free money on the table. These funds, including, grants, and work-study funds, went unclaimed because over half of the entire graduating class of 2022 in the United States, didn’t fill out their FAFSA application. Here’s how to not be one of those students:

1. Gather all the necessary financial information

Here’s a list of the information you typically need to submit a FAFSA form:

• Federal Student Aid ID, which you get when you create an account on StudentAid.gov
• Driver’s license number
• Social Security or Alien Registration number
• Federal income tax returns & records of untaxed earnings
• Statements for bank and investment accounts (if applicable)
• Names of up to 10 schools where you want your FAFSA submitted

2. Fill out your application(s) online

While you can get a FAFSA application in any school’s financial aid office, we recommend completing it electronically. You register for FAFSA through fafsa.gov. Once you’ve registered, you can fill out the FAFSA form online.

3. Review your Student Aid Report

Once the Department of Education processes your application, you’ll receive a Student Aid Report. This provides a summary of all the information you entered in your application. It can take between three days and three weeks to get this report.

It’s important to review it for accuracy; you can edit the FAFSA form you submitted, if necessary. Fixing any errors promptly because financial aid works on a first-come, first-served basis. You don’t want to miss out on aid because of an application error.

Sometimes a school you included on your FAFSA may select you for verification. Some schools do this randomly, while others require it for all students. It simply means you may need to provide extra documentation to confirm what you entered on the FAFSA. Just make sure to provide the documentation requested on time. Missing the deadline means you may forfeit federal financial aid.

5. Wait for your financial aid award letter

After completing the FAFSA, you’ll receive a financial aid award letter from the colleges you listed on your form. (If you receive acceptance from a college but don’t receive your award letter, call the college’s financial aid office). This letter will detail all the financial aid you qualify for with that school, including federal student loans, grants, or a work-study. The financial aid award letter will also specify the type of federal loans you could receive and you may see a mixture of subsidized and unsubsidized Direct loans.

Subsidized loans are ones where the government pays the accrued interest while you attend school. This means your student loan debt won’t grow while you’re getting your education and is why subsidized loans are always the preferred type of student loan to have. Unsubsidized loans will accrue on interest starting from the day they’re first dispersed. So even though you’re not obligated to start making payments on them while you’re in school, your loan balance will continue to grow.

If you receive award letters from multiple schools, make sure you compare the aid packages and the amount of subsidized/unsubsidized loans offered.

Applying for federal student loans for grad school

The Grad PLUS Loan application is separate from FAFSA. However, you will still need to fill out and submit a FAFSA before applying for a Grad PLUS Loan. If you need full funding minus the aid you receive through FAFSA, you can check the box that says, “I want to borrow the maximum Direct PLUS Loan amount for which I am eligible, as determined by the school.”

Before you begin the Grad PLUS Loan application process, you will need:

• A verified Federal Student Aid (FSA) ID, which replaces your Social Security number on the application
• School name
• Personal information (such as email, address, and phone number)
• Employer’s information (like company name, address, and phone number)
• A specific amount that you’ll need to borrow

The application process for Grad PLUS Loans

1. Go to the Direct PLUS Loan application page and log in with your FSA ID.
2. Input your loan information, including the award year, authorization for the school to use the funds, school and loan information.
3. Input your own personal information and your employer’s information.
4. Verify all your information is correct.
5. Authorize a credit check by the U.S. Department of Education. Once you submit your application, you will get notified if the credit check was accepted or rejected.
6. If your credit check is accepted, you will sign a Master Promissory Note (MPN). If your credit is declined, you can get a co-signer to complete the application with you or you can try explaining your circumstances.
7. If you receive a “pending” notification instead of an acceptance or rejection, contact the Student Loan Support Center.

Applying for Parent PLUS loans

In the instance that a student isn’t granted enough financial aid in their name, their legal guardians can take out a federal student loan in their name that can be used towards the student’s education. Much like the Grad PLUS Loan application, parents must complete the FAFSA with their child before they can apply for a Parent PLUS Loan.

Before you begin the application process, check the eligibility requirements:

• You must be the biological or adoptive parent of a current student
• Your child must be a dependent who is enrolled at least part-time in college and participates in the federal Direct loan program.
• You cannot have any adverse credit history. That means you cannot have any federal student loans currently in default. If you have a delinquency of 90 days or more, or certain derogatory marks, like bankruptcy or foreclosure, the Department of Education defines this as adverse credit history.

However, parents who do not meet these credit requirements should still apply for the Parent PLUS Loan because denial may help their dependent student. Federal student loan limits are set higher for undergrads whose parents get denied for PLUS Loans. So, your child could access more federal student loans thanks to your rejection.

The application process for Parent PLUS Loans

1. The parent borrowing the Parent PLUS Loan should go to the StudentAid.gov website using the parent’s Federal Student Aid (FSA) ID.
2. Once you log in, click on “Apply for Aid” then click on “Apply for a Parent PLUS Loan.”
3. Carefully read the information provided and click “Start.”
4. Fill in all the necessary information on the PLUS Loan application. Make sure to select the correct Award Year.
5. Carefully read the information under the “Deferment While Student is Enrolled in School” section and check “Yes” or “No.”
6. Make sure and read the information under the section “Request for 6-Month Post-Enrollment Deferment” and then answer “Yes” or “No.”
7. Next, indicate if you authorize the UGA Student Account Services to use the PLUS Loan funds to pay for other educationally related charges on the student’s account.
8. Indicate if you want UGA Student Account Services to disburse the money directly to you or directly to your student from any PLUS Loan funds that are left over (known as the credit balance).
9. Select the university of your choice.
10. Specify the Parent PLUS Loan amount you plan to borrow for the Award Year. If you choose “I don’t know the amount I want to borrow…” the UGA Office of Student Financial Aid (OSFA) will contact you (the parent).
11. Indicate the term (loan repayment period) you want for your Parent PLUS Loan.
12. Once you complete the application, you will sign a Master Promissory Note (MPN).
13. Finally, the Department of Education will perform a credit check to see if you have any adverse credit history. If so, you may still qualify through one of two options:
    • Get a cosigner who agrees to repay the Direct PLUS Loan if you cannot. Your cosigner can’t be the child that you’re getting PLUS loans to help.
    • Appeal the decision and explain the extenuating circumstances that led to the adverse credit history.

If you get denied, you will receive more information from the Department of Education regarding these two options.  Both will require you to complete credit counseling for parent PLUS loan borrowers.

If you can’t get a Parent PLUS Loan, your child may still qualify for additional unsubsidized Direct loans. Make sure to complete the “Change in Aid Request,” and make sure to click “Yes” when asked, “In the amount(s) you requested if you are not eligible for a Federal Direct Subsidized Loan, would you like to be considered for an Unsubsidized Loan instead?” Then add a comment in the “Other Requests or Additional Information” field that the parent was denied a PLUS loan.

Reasons you could get denied for a federal student loan

Important changes to the FAFSA form

• The 2021 Consolidated Appropriations Act (CAA) resulted in new provisions made to FAFSA that went into effect October 1, 2022, and will begin for the 2023-2024 academic year.  The FAFSA form for the 2023-2024 academic year will be based on reported income in 2021.
• The Expected Family Contribution (EFC) has been renamed the Student Aid Index (SAI). The Expected Family Contribution (EFC) is the amount of money that the Department of Education expects a student’s family expects to contribute to college costs each year. The EFC considers family income, assets, size of household, and the number of family members currently enrolled in college. The lower the EFC, the higher the financial need and therefore, the increased likelihood of receiving federally sponsored financial aid programs like Pell Grants and Federal Work-Study Programs.
• The FAFSA form has been drastically simplified. It will go from over 100 questions to 36 questions.
• Currently, grandparent-owned 529 plan distributions are treated as untaxed student income, where 50% of the gift counts toward EFC. For example, if grandparents distribute $50,000 toward a grandchild’s education from a 529 plan, then the EFC increases by half the amount ($25,000). As a result of the new legislation, that $25,000 will drop to zero, increasing the possibility of getting student aid.
• Employers can make tax-free payments to employees’ student debt up to $5,250 through January 1, 2026. For 2021, the payroll tax savings for both employer and employee (if the employee is below the Social Security wage base) is 7.65%. The employer would also receive an income tax deduction for any payments made.
• Currently, there is a discount for having multiple children enrolled in a college. This is, unfortunately, being eliminated.
• Typically, in a divorce or separation, the custodial parent, or parent the child primarily lives with, must complete the FAFSA. Under the CAA, the parent who provides the most financial support must complete the FAFSA. So, the custodial parent may not necessarily be the one to fill out the FAFSA.

Applying for a CCS Profile

FAFSA isn’t the only pathway to apply for student loans through an aid program. There’s the lesser-known College Scholarship Services (CSS) Profile, which can help you get institutional aid from certain colleges.

Unlike the FAFSA, the CSS Profile isn’t free, unless you qualify for a waiver. There is an initial $25 fee, plus an additional $16 for every school you add to your list. However, the main advantage of the CSS Profile is that colleges that seemed out of reach may become a real option if you qualify for that institutional aid.

The CSS Profile is also worth submitting because you could get additional grants and scholarships, or another form of aid, from your school. This will help reduce the amount of debt you need to pay back.

If you choose to fill out your CSS Profile as well, you can apply through the College Board. Just make sure your intended college is on the list of participating schools before you pay to fill out any applications.

How to apply for private student loans

If you didn’t receive as much as you hoped in federal student loans, you can turn to private loans to cover the difference.

The process to apply for private student loans is much the same as applying for any other type of loan. There’s an application, that a loan officer will review in addition to your finances during the underwriting process. You’ll need good credit and need a low debt-to-income ratio to get approved. If you fail to meet those requirements, you may need a co-signer to qualify.

The steps to apply for private student loans:

1. Shop around to compare rates and terms offered by different lenders. Ask for quotes when shopping to avoid any hard credit checks on your credit report. Unlike mortgages and car loans, student loans are not grouped as one credit inquiry.
2. Choose the lender that offers the best loan to fit your needs. Depending on your situation, you may prioritize the lowest interest rate OR the lender with the most flexible repayment options.
3. Apply for the loan you need with the lender.
4. A loan underwriting officer will review your application. During underwriting, the lender will also check your credit score and credit report to see if you qualify and to determine your loan’s interest rate.
5. They may also require documents to verify your income, identity, and address. Forms generally include your driver’s license, pay stubs, W2s, and other tax forms.
6. If you are approved for the loan, the underwriter will tell you the interest rate and repayment terms of your loan. Make sure to ask questions, such as whether the loan has a grace period and what happens if you face financial hardship.
7. When you and the underwriter finalize the terms, they should provide a Truth in Lending Act (TILA) disclosure statement. This will detail the interest rate, monthly payment, repayment terms, and total cost of the loan. Make sure to review this carefully to ensure it meets your expectations. If you have questions, ask the underwriter.
8. Once all your questions are answered, and you fully understand the terms of your loan, sign the loan agreement. You can do this in person if the lender is local, although it’s usually done online through DocuSign.

The lender will typically disburse the funds to a designated bank account, rather than your university.

Compare your options

With private loans, there are a lot of different options to choose from. Banks, credit unions, online companies, and state-based agencies all offer private student loans. Some lenders may offer lower interest rates on private loans than other types of loans you can get with your credit profile. Some provide options like deferment and flexible repayment plans. Compare interest rates, fees, and borrower protections before you choose a lender.