The application process differs sharply between federal and private loans, and you must start with federal first

Federal student loans require you to complete the Free Application for Federal Student Aid (FAFSA), which opens October 1 each year and determines how much federal aid you can receive. Private loans skip the FAFSA and go straight to the lender — you fill out their own application, they check your credit, and they decide within days. The federal route takes longer but offers fixed interest rates and income-based repayment options; the private route is faster but ties your rate to your credit score and gives you fewer protections if you run into trouble later.

Most students should complete the FAFSA first, even if they think they won't may have access to for aid, because it unlocks federal loans and determines what private loans cost. Your school's financial aid office uses your FAFSA results to build your aid package. If you skip federal loans and go straight to private, you lose access to federal protections and often pay more over time.

Key Takeaways

  • The FAFSA opens October 1 each year and is required to access any federal student loans; you submit it online at studentaid.gov, not through your school.
  • Federal loans have fixed interest rates set by Congress and do not require a credit check, while private loans charge rates based on your credit score and can change over time.
  • After you submit the FAFSA, your school receives your results and includes federal loans in your financial aid package; you then accept or decline each loan type separately.
  • Private loan applications go directly to the lender and take one to three business days; you can apply while waiting for FAFSA results, but federal loans are almost always cheaper.
  • You must complete entrance counseling and sign a Master Promissory Note before the school disburses federal loan money to your account.

How to complete the FAFSA

Go to studentaid.gov — this is the only official FAFSA website. You will need your Social Security number, driver's license or state ID, and tax information from the previous year (your school year's FAFSA uses last year's taxes). Create a login using your email address, then fill out the form online. The FAFSA asks about your family's income, assets, household size, and whether you are a dependent or independent student. If you are unsure whether you count as independent, the FAFSA itself walks you through the criteria.

You can start the FAFSA on your phone or computer and come back to finish it later — your progress saves automatically. The form takes 20 to 30 minutes if you have your documents ready. When you finish, you receive a confirmation page with your Student Aid Index (SAI), which replaces the old Expected Family Contribution (EFC). Your school uses this number to calculate how much federal aid you can receive.

Submit the FAFSA as early as possible after October 1, because some aid runs out during the year. Schools process applications in the order they receive them, and federal grants (which you do not repay) have limited funding. If you miss the deadline for your school year, you can still submit a late FAFSA, but you may receive less aid.

What happens after you submit the FAFSA

Your school's financial aid office receives your FAFSA results within a few days and builds your aid package — a document showing all the aid you have been offered, including federal loans, private loans, grants, and work-study. The school sends this package to your student portal or by email. You then log into your school's system and accept or decline each type of aid separately. Accepting a loan means you are agreeing to borrow that money; declining it means you do not want it.

Before the school can send federal loan money to your account, you must complete entrance counseling and sign a Master Promissory Note (MPN). Entrance counseling is an online tutorial (usually 20 to 30 minutes) that explains how federal loans work, your repayment options, and what happens if you default. The MPN is a legal document in which you promise to repay the loan. Both are completed through your school's financial aid portal or through studentaid.gov. You do this once per loan type, not every year.

After you complete counseling and sign the MPN, your school disburses the loan money — usually split into two payments per year (one per semester). The money goes directly to your school account to pay tuition and fees; any leftover is sent to you as a refund, usually by check or direct deposit.

Federal loan types and what each one costs

The federal government offers four main loan types for undergraduate students: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans (for parents), and Direct Consolidation Loans (for combining existing loans). Subsidized loans do not accrue interest while you are in school at least half-time; unsubsidized loans accrue interest from the moment you borrow. Both have the same fixed interest rate, which Congress sets each year — for loans disbursed in 2024–2025, the rate is 8.25 percent.

You can borrow up to a certain amount per year depending on your year in school and whether you are a dependent or independent student. Dependent undergraduates can borrow $5,500 to $7,500 per year in subsidized and unsubsidized loans combined; independent undergraduates can borrow more. Graduate students can borrow up to $20,500 per year in unsubsidized loans. Your school's financial aid office tells you the maximum you can borrow based on your status.

PLUS Loans are for parents of dependent undergraduates or for graduate students borrowing for themselves. They require a credit check and charge a higher interest rate (8.25 percent for 2024–2025) plus an origination fee. Parents can borrow up to the full cost of attendance minus other aid. PLUS Loans are optional — your school includes them in your aid package only if you request them.

Applying for private student loans

Private loans come from banks, credit unions, and online lenders, not from the federal government. You apply directly to the lender through their website or by phone. Each lender has its own application form, credit requirements, and interest rates. Common private lenders include Sallie Mae, Earnest, LendingClub, and Discover, though your bank or credit union may also offer student loans.

To apply for a private loan, you will need your Social Security number, proof of income or enrollment, and information about any existing debt. The lender pulls your credit report and decides within one to three business days whether to approve you and at what interest rate. If your credit score is low, you may be denied or offered a high rate; if you have no credit history, you may need a cosigner (usually a parent) to be approved.

Private loan interest rates vary by lender and your creditworthiness. Some lenders offer fixed rates (which stay the same for the life of the loan) and variable rates (which change based on market conditions). Variable rates are usually lower at first but can rise significantly over time. Read the loan agreement carefully to understand what rate you are getting and whether it can change.

Comparing federal and private loans before you borrow

Federal loans offer protections that private loans do not: fixed interest rates regardless of credit score, income-based repayment plans, loan forgiveness programs for public service workers, and the option to pause payments if you face hardship. If you default on a federal loan, the government can garnish your wages, but you have options to rehabilitate the loan and get out of default. Private loans have none of these protections — if you cannot pay, the lender can sue you, and your only option is to negotiate a settlement or declare bankruptcy.

Private loans are usually more expensive than federal loans, especially if your credit is not excellent. Even if a private lender offers a lower starting rate, federal loans often cost less over time because the rate is fixed and you have more flexibility if circumstances change. Borrow the maximum federal loans first, then use private loans only for the remaining cost of attendance.

Use the Loan Comparison Tool on studentaid.gov to see the terms of each federal loan you have been offered. For private loans, request a Loan Estimate from each lender you are considering — this document shows the interest rate, fees, monthly payment, and total cost over the life of the loan. Compare these side by side before you decide.

What to do if you are denied or offered a high rate

If a private lender denies you or offers a rate you cannot afford, you have several options. First, check whether you have been offered enough federal loans — most students can borrow more in federal loans than they realize. Second, ask the private lender whether adding a cosigner would improve your approval or rate; a cosigner with good credit can lower your rate significantly. Third, wait and reapply after you have built credit history or paid down existing debt.

If you are denied federal loans, contact your school's financial aid office to understand why. Federal loans do not require a credit check, so denial is rare and usually means you did not complete the FAFSA or did not meet citizenship requirements. Your school can help you fix the issue.

If you cannot borrow enough to cover the full cost of attendance, explore other options: work-study jobs, scholarships, grants, employer tuition assistance, or attending a less expensive school. Taking on more debt than you can afford to repay creates long-term financial hardship.

Frequently Asked Questions

Can I apply for student loans before I am admitted to a school?

You can complete the FAFSA before you are admitted, but you cannot actually borrow until you are enrolled and your school has received your FAFSA results. The FAFSA asks which schools should receive your information; you can list schools you have applied to, and they will see your results once you are admitted and enroll.

What if I need to borrow more than the federal maximum?

If federal loans do not cover your full cost of attendance, you can borrow additional unsubsidized federal loans (up to your school's cost of attendance minus other aid) or turn to private loans. Ask your financial aid office what your maximum federal borrowing is before you apply for private loans.

Do I have to accept all the loans my school offers?

No. You can accept some loans and decline others. You might accept federal loans but decline private loans, or accept subsidized loans but decline unsubsidized. Your school's financial aid portal lets you pick and choose. Declining a loan means you do not borrow that money.

What happens if I do not use all the loan money my school disburses?

If your school sends loan money to your account and you do not use it all for tuition and fees, the leftover is refunded to you. You can use this money for books, housing, and other school expenses, but remember you will have to repay it with interest. Some students return unused loan money to reduce their total debt.

Can I change my mind after I accept a loan?

Yes, but timing matters. If you have not yet received the money, you can usually cancel the loan through your school's portal. If the money has already been disbursed to your school account, you have a limited window (usually 14 days) to return it. After that, you are locked into the loan and must repay it. Contact your financial aid office immediately if you want to cancel.