How to Apply for Student Loans: Federal and Private for 2025

by Alex Hillsberg , MA

Student Finance & Loan Expert

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Based on data from the U.S. Bureau of Labor Statistics (BLS), bachelor’s degree holders make about 67% more than high school graduates. Because of this, many students pursue further studies and seek financial aid to do so.

Student loans are one of the most common forms of financial aid, with outstanding student loan debt amounting to about $1.7 trillion nationally. If you are applying to postsecondary school, it may be helpful to know how to apply for student loans from federal and private lenders.

Key Things You Should Know About Applying for Student Loans

• It would be best to start learning how to apply for student loans early, ideally in 9th or 10th grade.
• Federal loans typically offer lower interest rates and more borrower protections than private loans.
• Federal loans prioritize financial need, while private loans require credit and income evaluation.
• You will have better chances of getting approved for a private loan with a co-signer.

Table of Contents

1. How to Apply for Student Loans
2. What are the different types of student loans available?
3. What are the interest rates for federal vs. private student loans?
4. How much can I borrow in student loans?
5. How do I determine if I'm eligible for student loans in 2024?
6. How long does it take to get approved for student loans? 
7. What factors do lenders consider when approving student loans?
8. What are the common challenges when applying for student loans?
9. What are the most common mistakes students make when applying for student loans? 
10. What are some alternative ways to finance my education?
11. How can exploring alternative career paths reduce my student loan burden?
12. How can student loan refinancing and consolidation enhance my financial strategy?
13. How can selecting an optimal degree program improve my student loan outcomes?
14. What are my options for loan forgiveness or repayment assistance?
15. How can I choose the best repayment plan for my student loans?
16. How can I leverage scholarships and grants to minimize my student loan burden?
17. How can I decode student loan agreement fine print?
18. How can you strategically manage loans as a part-time student?
19. How can graduate studies improve my student loan repayment prospects?
20. Other Things You Should Know About How to Apply for Student Loans

How to Apply for Student Loans?

If you are applying for college, it would be helpful to know how to apply for student loans from federal and private sources. Federal student loans are typically the first option for students because they are typically more affordable and offer more borrower protections than private loans do. You can apply at studentaid.gov using the following steps.

1. Check if Your School is Eligible. Ask your school what student loans and aid they accept as payment. Student loans can also finance studies abroad, provided the school receives
2. Complete the FAFSA. Once you have, you must complete the Free Application for Federal Student Aid (FAFSA). The government uses this form to assess financial need and determine your eligibility for various federal aid programs, including grants, scholarships, and student loans. 
3. Review Your SAR. After submitting your FAFSA, you will receive a Student Aid Report (SAR) from the Department of Education. This report will show the types and amount of aid you qualify for.
4. Accept or Decline. Once you receive your financial aid award letter from your school, you can decide how much (if any) of the federal loan amount you want to accept.  Most schools allow you to accept, decline, or reduce your loan award online through their financial aid portal.

If you decide to pursue private loans to cover additional costs, research and compare lenders. Most private lenders allow borrowers to apply for loans online. 

1. Complete the Online Application. Provide your personal and financial information, school details, and requested amount.
2. Credit Check and Approval. The lender will conduct a credit check, both on you and your cosigner (if applicable). Your credit score will significantly impact the interest rate you're offered. The lender will review your application and determine your eligibility and loan terms.
3. Loan Offer. If approved, the lender will send you a loan offer outlining the loan terms, interest rate, and repayment details. Carefully review the offer and ensure you understand all the conditions before accepting.
4. Loan Disbursement. Once you accept the loan offer and complete any necessary verification steps, the lender will disburse the loan funds directly to your school or you, depending on the lender's process.

While a loan can rarely cover the full cost of a degree, it is a common source of financial aid. As the chart below shows, about 41% of families took on debt to afford college in 2023.

What are the different types of student loans available?

When you look up how to apply for student loans, you will find options for both federal and private loans. Federal loans are offered by the U.S. government, while private loans come from banks, credit unions, and online lenders.

Besides providing Title 1 school funds, the federal government offers student loans for students in college or graduate school. Congress sets interest rates for these loans each year which remain constant throughout the loan term. Federal loans comprise the bulk (98.2%, or $1.60 trillion) of outstanding student loan debt according to research by Hanson.

Private student loans, meanwhile, make up $125 billion of outstanding student debt. The interest rate you qualify for is based on your credit history, credit score, and income rather than financial need. If you do not meet a lender’s creditworthiness requirements, you can apply for a loan with a co-signer who does.

What are the interest rates for federal vs. private student loans?

Once you have discovered how much does it cost to get a bachelors degree, you can begin comparing interest rates for different types of loans. Rates vary widely, going from about 3% to 18% depending on the lender. Federal loans typically come with lower interest rates than private. The table below shows rates for both federal and private student loans, current as of July 2024.

Federal loans come with fixed rates, which means they do not change throughout the life of the loan. When you borrow from private lenders, you can get either fixed or variable interest rates. Unlike fixed-rate loans, interest for variable-rate loans fluctuates each year based on market conditions.

How much can I borrow in student loans?

The amount you can borrow is typically based on your cost of attendance and other financial aid you receive. However federal loans, unlike private student loans, have a set limit for all borrowers.

The Department of Education sets the limits for federal student loan borrowing, which you will come across when you research how to apply for student loans. We have listed the borrowing limits for federal loans in the table below.

How do I determine if I'm eligible for student loans in 2024?

You can use a student loan as a means of paying for MBA, college, or trade school. However, you may not qualify for every type of loan. As you research how to apply for student loans, you should also be looking up the eligibility criteria for each lender.

For federal student loans, the government prioritizes applicants with demonstrable financial need. Apart from this, prerequisites include:

• Be enrolled at least half-time in an eligible degree or certificate program
• Be a U.S. citizen, national, or eligible noncitizen
• Have a valid Social Security number
• Meet satisfactory academic progress standards set by your school
• Not be in default on any federal student loans

The requirements are a little different for private loans. Applicants must meet the lender's credit and income requirements, which often include having a strong credit score and steady income. If you do not meet the creditworthiness requirements independently, you may need a co-signer on your loan. In the case of Earnest, applicants are as much as five times more likely to be approved for a loan with a co-signer.

How long does it take to get approved for student loans? 

The FAFSA application can take between three and five days to process initially. After that, it usually takes about three weeks to receive a financial aid award letter from your school.

If you accept the federal loans, the funds will be released at the start of each academic term. Any leftover money refunded to you within a few weeks. The timeline for federal student loans can range from a few weeks to a few months from start to finish.

How to apply for student loans is different for private lenders. It usually takes two to eight weeks to process a loan application and disburse the funds. Private loans must also be certified by your school before the funds can be disbursed, which can add another few weeks to the process.

What factors do lenders consider when approving student loans?

Understanding what lenders look for is a key part of how to apply for student loans. All lenders will consider your cost of attendance which can include the cost of educational materials and how much does online college cost. However, federal and private lenders prioritize different types of borrowers.

For federal student loans, the government will consider your financial need as determined by your FAFSA application. If you demonstrate need, you will likely qualify regardless of your credit history. 

Private lenders are more concerned with your ability to repay. They'll analyze your credit score, income (if you have any), and debt-to-income ratio to make this assessment.  If your credit score is lacking, having a cosigner with a strong credit history can significantly boost your approval odds for a private loan.

What are the common challenges when applying for student loans?

Applying for student loans can be a complex process filled with potential challenges. Being aware of these issues can help students navigate the process more effectively. Below are some common hurdles and how to address them:

• Understanding Loan Types: Federal vs. private loans offer different benefits, interest rates, and repayment terms. Many students struggle to decide which type suits their needs best. Researching thoroughly and consulting with financial aid advisors can help.
• Meeting Deadlines: Missing FAFSA or private loan application deadlines can reduce access to aid. Set reminders for deadlines and gather necessary documents early to avoid delays.
• Creditworthiness Issues: Private loans often require a strong credit score or a co-signer, which can be a barrier for some students. Work on improving your credit or find a trusted co-signer to increase approval chances.
• Loan Amount Confusion: Determining how much to borrow is challenging; taking too much can lead to unnecessary debt, while too little might not cover costs. Use a budget to estimate your expenses and borrow only what you need.
• Understanding Loan Terms: Many borrowers fail to fully comprehend the terms, including interest rates and repayment schedules. Pay attention to whether your loan has a fixed or variable rate. Fixed-rate student loans offer stability in monthly payments, as detailed in this guide on fixed rate student loan.

By anticipating these challenges and seeking proper guidance, you can make more informed decisions, ensuring a smoother loan application experience.

What are the most common mistakes students make when applying for student loans? 

Between deadlines, complex forms, and loan options, even the most organized students can become overwhelmed when applying for loans. By being aware of common mistakes, you can save yourself time and avoid making costly oversights. Avoid these mistakes if you want to know how to apply for student loans properly.

• Inaccurate Information on the Application. Any errors or inconsistencies in your student loan application can cause delays or even denials of aid. You should double-check their information carefully before submitting it.
• Not Meeting Deadlines. There are deadlines for submitting the FAFSA and accepting your federal loan award. Missing these deadlines can significantly reduce the amount of federal aid you receive.
• Borrowing too Much. It may be tempting to take out the maximum amount offered, but it is vital to borrow only what you need to avoid incurring unmanageable debt.
• Not Understanding Loan Terms. Before accepting any loan offer, thoroughly understand the interest rate, repayment terms, and any potential fees associated with the loan.

How can exploring alternative career paths reduce my student loan burden?

By assessing nontraditional career trajectories that offer robust earnings with shorter or specialized education, students can create financial buffers that minimize dependency on loans. Researching alternative fields—such as roles in the healthcare sector—may reveal opportunities for immediate income growth and financial independence. For instance, some careers in healthcare offer significant remuneration early on, exemplified by 6 figure medical jobs with little schooling. Integrating these insights into long‑term financial planning can help align educational investments with realistic income outcomes.

How can student loan refinancing and consolidation enhance my financial strategy?

Leveraging refinancing and consolidation can reduce total interest costs and streamline multiple loans into a single monthly payment. Evaluating new terms may uncover lower rates and greater repayment flexibility compared to originated loans. This approach requires a thorough review of both private and federal options to ensure that borrower protections remain intact while meeting long‑term financial goals. For advanced education options, exploring detailed programs such as our master degree courses list can further align debt management with career development objectives.

How can selecting an optimal degree program improve my student loan outcomes?

Choosing a degree program that aligns with current market trends and realistic career prospects can significantly reduce long-term debt challenges. By opting for programs with strong post-graduation earning potential and efficient completion timelines, students are better positioned to manage repayment schedules and leverage financial aid effectively. Evaluating programs based on curriculum relevance, industry partnerships, and overall institutional reputation contributes to a well-informed investment decision, supporting both immediate loan management strategies and long‑term financial stability. For additional insight into accessible academic pathways, consider exploring the easiest graduation degree.

What are my options for loan forgiveness or repayment assistance?

Explore federal programs like Public Service Loan Forgiveness and Income-Driven Repayment plans to reduce repayment burdens based on income or qualifying employment. Additionally, some repayment assistance programs offer temporary relief or debt cancellation for specific professions and economic hardships. For private borrowers, evaluating innovative refinancing options—such as private student loans no cosigner—may provide greater flexibility without the need for additional guarantors. Ensure you review eligibility requirements and consult with financial aid professionals to align these options with your financial strategy.

How can I choose the best repayment plan for my student loans?

Selecting an optimized repayment plan requires a thorough evaluation of the available options, including standard, income-driven, and graduated models. Compare these plans based on projected income, job stability, and long‑term financial objectives to ensure manageable monthly payments and minimal total interest. Use lender-provided tools and calculators to simulate different repayment scenarios and adjust your choice as your financial situation evolves. For specialized financing needs, such as aviation education, explore options like flight school loans that may offer tailored terms and more flexibility.

How can I leverage scholarships and grants to minimize my student loan burden?

Maximizing alternative funding options is essential to offset the need for large student loans. Prospective students should evaluate various scholarship programs, institutional grants, and employer tuition assistance opportunities that can directly reduce borrowing. Analyzing funding criteria for federal and state programs alongside targeted awards can create a balanced financial aid package. Additionally, consider cost-effective educational opportunities offered by cheap accredited online colleges to further minimize debt while maintaining academic quality.

How can I decode student loan agreement fine print?

Reviewing the specific terms in your loan agreement is essential for safeguarding long-term financial stability. Focus on critical clauses such as interest capitalization, deferment policies, and prepayment penalties to understand how they could increase the overall cost of borrowing. Analyze terms related to rate adjustments and repayment triggers that may affect your planning. For instance, assessing alternative education models like quick college degrees can offer accelerated paths to completion, potentially minimizing debt exposure. Engage financial tools or professionals for an objective review of contract details to ensure transparency and alignment with your financial goals.

How can you strategically manage loans as a part-time student?

Navigating student loans can be uniquely challenging for part-time students due to limited financial aid eligibility and tighter budgets, but strategic planning can help manage this process effectively. One critical step is to explore loans specifically designed for part-time students, as these may come with more flexible repayment options tailored to their needs. To learn more, check out a comprehensive guide on the best options for part time student loans USA.

Beyond securing the right loan, part-time students should carefully calculate their projected income post-graduation and focus on borrowing only what is necessary. Leveraging employer tuition assistance programs, which are often available to working part-time students, can also reduce reliance on loans. Additionally, exploring income-driven repayment plans for federal loans can ensure manageable payments that adjust to their financial reality while enrolled less than full-time.

Ultimately, the key is combining tailored loans, free aid such as grants and scholarships, and proactive financial planning to minimize debt while maximizing academic and career opportunities.

How can I improve your credit score for better loan options?

Establishing a strong credit profile can significantly enhance your eligibility for favorable student loan terms. Begin by regularly reviewing your credit report to identify and correct inaccuracies. Consistent on-time payments and gradual reduction of outstanding debt contribute to long-term score improvements. In situations where credit challenges persist, consider exploring tailored solutions such as student loans for bad credit to access options designed for those with lower credit ratings. Employing credit-builder products, like secured credit cards or credit-builder loans, can also provide a pathway toward more competitive loan offerings.

How can graduate studies improve my student loan repayment prospects?

Pursuing advanced education can significantly enhance career trajectories and income potential, thereby making loan repayment more manageable. Many students benefit from targeted programs, increased networking opportunities, and access to higher earning roles after completing graduate studies. For example, opting for a program in high paying master's degrees may provide a clearer pathway to robust annual salaries, which in turn facilitates a more aggressive repayment strategy. Evaluating the return on investment, industry demand, and alumni success stories can further support informed decision-making regarding the choice to pursue further education.

Key Findings

• Federal loans constitute 98.2% of outstanding student debt, amounting to $1.60 trillion.
• Private student loans account for $125 billion of the total outstanding debt.
• Federal loans have set borrowing limits, with dependent students eligible for up to $7,500 per year, and independent students eligible for up to $12,500 per year for undergraduate studies.
• Private college students received an average of $14,343 in free aid, while public college students received $6,692.
• Scholarships and grants covered about 25% of the typical family’s educational expenses in the 2022-2023 academic year.

What Graduates Have To Say About Their Student Loans

"For years, I put my dreams of becoming a nurse on hold to raise my son. Now that he's older, getting a student loan allowed me to return to school and chase my passion. It's challenging juggling school and work, but knowing I'll have a better career to support my family keeps me motivated." - Maria

“I got a student loan to attend my dream engineering program out of state. The program has amazing facilities and professors, and I'm already getting hands-on experience.  The debt is a consideration, but I know this degree will open doors to a rewarding career." - Daniel

"Without federal student loans, there's no way I could have afforded college.  It opened doors to a career I never thought possible. Now, as a social worker, I'm helping others achieve their dreams." - Olivia

Other Things You Should Know About How to Apply for Student Loans

When should a student start looking into student loans?

You can research student loans in 9th or 10th grade as you plan for college. This will give you ample time to understand the different loan options, eligibility requirements, and deadlines for applying for federal aid. You can also research scholarships and grant opportunities during this time.

Are student loans available to everyone?

Student loans are an accessible form of aid, especially federal student loans. This is because lenders generally have broad eligibility requirements and have simple online application processes. 

Even so, taking on debt can add pressure on students as they are studying. It is crucial to understand how to apply for student loans, but it is best to maximize free aid like grants, scholarships, and work-study programs before looking at loans.

Are student loans really worth it?

A degree can lead to higher earning potential, according to the Bureau of Labor Statistics.  In 2022, workers with a bachelor's degree earned a median weekly wage of $1,432 versus $853 for those with a high school diploma only. 

A 2023 report by the Federal Reserve found that the benefits of earning a degree made loan debt worthwhile for many students. Nearly half (44%) of survey respondents agreed the value of their degree outweighed the cost of their student loans. 

Reference:

1. Cloos, K. (2024, May 7). Do You Need a Cosigner for Student Loans? Earnest. Retrieved July 15, 2024, from https://www.earnest.com/blog/do-you-need-a-cosigner-for-student-loans
2. College Board. (n.d.). Trends in College Pricing Highlights. College Board Research. Retrieved July 15, 2024, from https://research.collegeboard.org/trends/college-pricing/highlights
3. The Federal Reserve System. (2024, May). Economic Well-Being of U.S. Households in 2023 [PDF]. The Federal Reserve System. Retrieved July 15, 2024, from https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf
4. Hanson, M. (2024, June 27). Total U.S. Student Loan Debt: 2024 vs Previous Years (Chart). Education Data Initiative. Retrieved July 14, 2024, from https://educationdata.org/total-student-loan-debt
5. Medine, T., & Pimplaskar, E. (n.d.). Private Student Loans: Compare Top Lenders | July 2024. Credible. Retrieved July 14, 2024, from https://www.credible.com/student-loans
6. U.S. Bureau of Labor Statistics. (2023, May). Education pays, 2022 : Career Outlook: U.S. Bureau of Labor Statistics. Retrieved July 15, 2024, from https://www.bls.gov/careeroutlook/2023/data-on-display/education-pays.htm
7. U.S. Department of Education. (n.d.). Federal Interest Rates and Fees. Federal Student Aid. Retrieved July 14, 2024, from https://studentaid.gov/understand-aid/types/loans/interest-rates