Figuring out how to pay for college can feel like a puzzle, and taking out student loans can impact your finances for years after graduation. But by borrowing the right type of debt and managing it properly, you can set yourself up for success today. 

Review the differences between federal and private student loans and see the steps to apply for each. 

When it comes to borrowing for college, there are two types of student loans available: federal and private. 

The Department of Education offers federal student loans. These have fixed, standardized interest rates, and benefits like flexible deferral and forbearance, income-driven repayment plans, and loan forgiveness programs. Plus, most federal loans don’t require a credit check or cosigner. Because of these perks, they are the preferred option for many students.

Private student loans, on the other hand, are offered by banks, credit unions, and online lenders. These loans are based on your credit profile, and you may need a cosigner if you don’t have strong credit. In addition, the interest rates you qualify for are also based on your credit. 

While private student loans can sometimes have higher rates and fewer perks, they may be necessary for borrowers who don’t receive enough funding from federal loans and other financial aid to cover the total cost of their education.

While federal loans are preferable to many students, the application process can be complex. Here’s what you’ll need to do. 

The Free Application for Federal Student Aid (FAFSA) is a crucial first step in securing federal loans. You must fill out this form each year you attend college to determine your eligibility for federal grants, work-study programs, and student loans. 

The FAFSA asks for detailed information about your financial situation, including your income, assets, and family size. If you’re a dependent student (many undergraduates are), a parent will also need to fill out some sections of the form. 

The newest FAFSA typically becomes available annually on Oct. 1 — though it’s possible that the 2024-25 FAFSA won’t be released until December. Schools and states can set their own submission deadlines, and some financial aid is awarded on a first-come, first-serve basis. For these reasons, submit your application as close to the October opening as possible to maximize your aid.

After submitting the FAFSA, you’ll receive your Student Aid Report, or SAR, within a few days or weeks. This includes a summary of your financial and personal information, so review it carefully for mistakes. If necessary, submit corrections to your FAFSA by logging into your Federal Student Aid account.

After you submit the FAFSA, your information will be sent to your desired school(s). Each college you’ve been accepted into will use your data to calculate your eligibility for aid before sending you a financial aid award letter. This outlines any federal loans, grants, or work-study options that you qualify for, as well as any school-based scholarships you’ve been awarded. 

Review this letter to see what financial support you can get and how much you’ll have to pay out of pocket. Decide which aid you want to accept and alert your school by the deadline it has set. Typically, you’ll want to first accept awards that don’t have to be repaid, such as grants and scholarships. Then you might borrow loans to cover remaining expenses.

Exactly when you receive your financial aid letter depends on the school. You might receive it the winter before your fall semester, or it might arrive just before you start school. Contact your college’s financial aid office for more details about timing.

After you’ve accepted or declined the aid you were offered, you’ll need to finalize a few things. 

When taking out federal loans, start by completing entrance counseling. This is a requirement for all first-time borrowers and provides important information about your rights and responsibilities. You can complete entrance counseling on the Federal Student Aid website in about 30 minutes.

Next, review and submit your Master Promissory Note (MPN). The MPN is a legal document that outlines the terms and conditions of your loan, including the interest rate, repayment plans, and loan fees.

Once you’ve completed these tasks, your school will certify your loan, and the Department of Education will disburse funds to your school. After paying any applicable tuition, fees, and room and board, your school will issue any remaining loan money to you.

Private student loans have a simpler application process but stricter eligibility requirements. Here’s what to expect.

While federal loans have standardized interest rates and policies, each private student lender sets their own rates, fees, and terms. That’s why it’s so important to compare lenders and find the best deal for your financial situation.

As you review your options, take note of the following factors that each lender offers:

Many private lenders allow you to prequalify for a student loan. To do so, submit a few pieces of personal information and the lender will provide an estimate of the interest rates and loan terms you may qualify for. Prequalifying usually only involves a soft credit check, which doesn’t impact your score.

While a prequalification doesn’t guarantee your approval or loan terms, it can be a useful way to more accurately compare lender offerings — without having to submit a full application. 

Once you’ve completed your research and determined your preferred lender(s), it’s time to submit an application.

Most lenders offer online applications which will ask for your personal and financial information. You’ll likely need to provide proof of income, such as recent pay stubs or tax returns. If you’re applying with a cosigner, they’ll need to provide the same details. 

After you submit your application, the lender will review it to determine whether you qualify. Some lenders can approve loans in minutes, but others may take several days or weeks. During this time, the lender may request additional information or documentation. Respond to these requests promptly to avoid delays. 

Once you’ve been approved for a private student loan, review the terms and conditions offered by the lender. Carefully compare offers from various lenders to ensure you get the best deal possible.

Once you have selected a lender and reviewed the details, finalize the loan by signing the agreement. 

Once you’ve completed your part, the lender will work with your school to certify your enrollment and the cost of attendance. Like federal loans, the money will likely first be sent to your college, which will apply the funds to your outstanding fees before sending any remaining cash to you.  

Related: Learn more about getting a private student loan.

While federal and private loans can be a helpful way to finance your education, there are other options available.

It can be easy to borrow a student loan — until it’s time to start paying it back. Consider these strategies to lower your debt burden and set yourself up for success after graduation.

Related: Learn more about getting a private student loan