How to Apply for Student Loans

Student loans have become a necessary evil for most people who want to further their education. Knowing what loans students can apply for and how they function can set borrowers up for managing student loan debt effectively after graduation.

Table of Contents:

How to apply for federal student loans through FAFSA

Federal loans are usually the best option when you need to borrow money for school because they offer specialized repayment options. For example, students can:

• have federal loans forgiven
• adjust payments to match their income
• qualify for deferment if they face unemployment or economic hardship

The application process for federal loans is entirely unique from other types of loans. Students don’t need good credit to qualify for federal student loans. Instead, they qualify based on financial need.

A 2018 survey by the U.S. Department of Education found that 3 out of 10 students did not complete FAFSA because they thought they wouldn’t qualify. However, each year, roughly $2 billion in aid goes unused. Often, students that do apply are surprised that they qualify for aid.^[1]

Here are the steps to apply for federal loans:

1. Gather all the necessary financial information

To qualify for federal student loans, a student must fill out the Free Application for Federal Student Aid (FAFSA). FAFSA application season opens on October 1 of every year, and you want to submit the application as soon as possible. The application season closes on June 30^th of the following year. You must submit the application before June 30^th, 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. Some schools may also require a College Scholarship Service (CSS) Profile, which we’ll go into more detail about below. So, make sure to check with your school regarding their deadlines and requirements.

You must reapply for FAFSA every year until you graduate. So, each year, you’ll get a fresh round of federal loans.

The best way to get ahead is to gather all the necessary financial information. Here’s a list of the information you typically need:

• 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, plus records of untaxed earnings
• Statements for bank and investment accounts (if applicable)
• List of up to 10 schools where you want your FAFSA submitted

You can also refer to this worksheet by the Federal Student Aid to help you better prepare.

2. Make use of the CSS 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.

3. 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.

Read Debt.com’s Guide for 4 Tips for Filing FAFSA ».

4. 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. If that happens, don’t worry. 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 wait for 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. Ask them about the status of your financial aid award letter.

Your letter will detail all the financial aid you qualify for through that school, including federal student loans. For example, if you qualify for grants or a work-study, that information will be on your award letter. But if you only receive an offer for student loans that means you did not qualify for free aid.

For federal loans, you may see a mixture of subsidized and unsubsidized Direct loans. Subsidized loans are preferable because the government pays the interest that accrues on the loans while you attend school. So, your student loan debt doesn’t grow while you get your education. Interest will accrue on unsubsidized loans, meaning your debt will increase as you attend school.

Keep in mind that you are not required to take all the aid offered to you. Only take out loans to cover what you need for tuition, room and board, and books.

If you receive award letters from multiple schools, make sure you compare the aid packages as you decide which college to attend. Your goal should be to avoid as much student loan debt as possible. Failing that, you need to fund as much of your college costs as possible through federal student loans. They’re much more manageable than their private counterparts, especially if you face any financial hardship once repayment starts.

Changes to the Expected Family Contribution (EFC)

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. That means greater eligibility for federally sponsored financial aid programs, like Pell Grants and Federal Work-Study Programs.

However, because of the 2021 Consolidated Appropriations Act (CAA), provisions were made to the Free Application for Federal Student Aid (FAFSA). The new provisions go into effect October 1, 2022, for the 2023-2024 academic year. They will provide immediate college planning opportunities for families because the FAFSA form for the 2023-2024 academic year will be based on reported income in 2021.

Moreover, the Expected Family Contribution has been renamed the Student Aid Index (SAI).

Here are a few other changes student loan applicants should note:

• 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.

Reasons you could get denied for a federal student loan

How to apply for federal student loans for grad school

The Grad PLUS Loan application is separate from the Free Application for Federal Student Aid (FAFSA). However, you will still need to fill out and submit a FAFSA before applying for a Grad PLUS Loan.

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)
• If you are requesting a set amount, figure that number out before applying.
• 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.”

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 funds, and 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 to rejected.
6. If your credit check is accepted, you will sign a Master Promissory Note (MPN).
7. When your credit is declined, you can get a co-signer to complete the application with you or you can try explaining your circumstances.
8. If you receive a “pending” notification instead of an acceptance or rejection, you need to contact the Student Loan Support Center.

How to apply for Parent PLUS loans

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 half-time in a 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. That’s because 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.

How to apply 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. If the PLUS Loan is for the Fall of 2022, Spring or Summer of 2023, you would select 2022-23 (once available).
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” 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:
    1. You get an endorser or cosigner, who agrees to pay repay the Direct PLUS Loan if you cannot. Your cosigner can’t be the child that you’re getting PLUS loans to help.
    2. You can document to the satisfaction of the U.S. Department of Education regarding 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.

How to apply for private student loans

Once you’ve applied for all the federal loans you can receive, you may need private loans to cover any difference in cost not covered by your aid package.

The process to apply for private student loans is much the same as applying for any other type of loan. The application process is the same—a loan officer will review your application and finances through an underwriting process. That means you need generally need good credit and need a low debt-to-income ratio. If you fail to meet those requirements, you may need a co-signer to qualify.

It’s important to compare all your options because 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 also provide options like deferment and flexible repayment plans. So, compare interest rates, fees, and borrower protections before you choose a lender.

Here are the steps you take 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. Once they receive your application, a loan underwriting officer will review your application.
5. Promptly supply documents to the underwriter. They will need to verify your income, identity, and address. Forms generally include your driver’s license, pay stubs, W2s, and other tax forms.
6. 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.
7. 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.
8. 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.
9. Once all your questions are answered, and you fully understand the terms of your loan, you will 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 bank account you designate electronically.