How to Take Out a Student Loan: Everything You Need To Know for 2025

by Alex Hillsberg , MA

Student Finance & Loan Expert

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Taking out a student loan is a major step toward funding your education, but the process can seem daunting with $1.727 trillion in total student loan debt and an average federal loan balance of $37,088 as of 2023. In this article, we will guide you on how to take out a student loan, breaking down everything from understanding different loan types to securing the best possible terms. Whether you're navigating federal loans with their lower interest rates or exploring private loans, we provide insights and practical tips to make informed decisions and manage your financial future effectively.

Key Things You Should Know About Taking Out a Student Loan for 2025

• Begin the process early by filling out the Free Application for Federal Student Aid (FAFSA) as soon as it becomes available in October to maximize your potential financial aid.
• Gather essential documents such as your Social Security number, federal income tax returns, and other financial records before applying to streamline the FAFSA submission process.
• Carefully review your Student Aid Report (SAR) after submission to ensure all information is accurate and to understand your eligibility for federal aid.
• Evaluate financial aid offers from various institutions to compare how much aid is offered in the form of grants versus loans and make an informed decision based on your financial need and academic goals.
• Understand the obligations of your student loans by completing mandatory entrance counseling, which educates you about your responsibilities and the terms of the loan before you accept it.

Table of Contents

1. How to Take Out a Student Loan for 2025
2. What are the types of student loans?
3. How to Take Out a Private Student Loan
4. What do you do after submitting a student loan application?
5. What are alternatives to student loans?
6. How to Get a Low Interest Student Loan
7. How can specialized student loans support your career goals?
8. What should you consider before getting a student loan?
9. Do Medical School Loans Cover Living Expenses?
10. What are the advantages of federal loans over private loans?
11. What are the differences between direct subsidized loans and direct unsubsidized loans?
12. Is taking a student loan worth it?
13. How to Choose the Right Type of Loan for Specialized Careers
14. Which Repayment Plan Best Aligns with My Financial Goals?
15. What are the common pitfalls to avoid when taking out a student loan?
16. How Does Your Degree Program Choice Impact Your Student Loan Repayment?
17. Is an Accelerated Graduate Program a Smart Financial Investment?
18. Can a Dual Degree Program Improve Your Student Loan Outcomes?
19. Is Refinancing or Consolidation a Viable Option for Lowering Your Student Loan Costs?
20. How Can Student Loans Impact Your Long-Term Financial Security?
21. Are Online Colleges a Practical Alternative for Reducing Student Loan Debt?
22. Other Things You Should Know About Taking Out a Student Loan

How to Take Out a Federal Student Loan for 2025?

To take out a federal student loan, follow these steps:

1. Fill out the FAFSA as soon as it opens in October each year.
2. Collect necessary documents such as your Social Security number, federal tax return, and proof of income.
3. Complete and submit the form online to determine your eligibility for federal aid.
4. Check your Student Aid Report (SAR) for accuracy after it is processed.
5. Assess the financial aid letters from colleges to understand your aid package.
6. Undergo entrance counseling to learn about your loan obligations.
7. Choose the loans you need and accept them through your chosen school’s process.

With $1.727 trillion in total student loan debt and an average federal loan balance of $37,088 as of 2023, understanding how to take out a student loan is crucial, especially with the effects of rising college tuition.

Here's What Graduates Have to Say About How They Took Out a Student Loan

• Taking out a student loan was a big decision, but it allowed me to focus fully on my studies without financial stress. It's not just about getting through college; it's about emerging with experiences and connections that set the stage for my career. -Maya
• My online degree program was the step I needed for career advancement, and securing a student loan made it possible. The investment was worthwhile as it provided me with the flexibility to study while working, enhancing my skills without pausing my job. -Dominic
• Thanks to my student loans, I was able to attend a prestigious program that seemed out of reach financially. The loan not only covered tuition but also gave me access to resources that have been crucial in my personal and professional development. -Allie

What are the types of student loans?

There are mainly two types of student loans: federal and private. 

Federal student loans, making up 92.8% of the $1.727 trillion total student loan debt, are often the first choice due to their lower interest rates and more flexible repayment options. The most common federal loans include 

• Subsidized and Unsubsidized Stafford Loans, 
• Direct Consolidated Loans, and 
• PLUS Loans. 

On the other hand, private student loans are sourced from banks and credit unions and account for 7.2% of the debt. These loans are typically sought when federal options are exhausted. Before you even start looking into how to take out a student loan, understand that the different types of loans to determine which one best suits your needs.

How to Take Out a Private Student Loan?

To take out a private student loan, start by exploring your options. With a national private student loan balance of $128.8 billion and less than 2% entering default, these loans are a substantial yet reliable part of student finance. Here's how to proceed:

1. Shop around to find competitive interest rates and favorable terms.
2. Ensure you meet the lender’s credit and income requirements.
3. Submit your application with necessary documentation like proof of enrollment and income.
4. Wait for approval. The lender will verify your information and confirm your loan amount with your school.

Knowing how to take out a student loan is vital as you navigate the costs of higher education.

What do you do after submitting a student loan application?

After submitting a student loan application, it's important to stay proactive and organized. Firstly, you'll receive a confirmation that your application has been received—keep this for your records. Then, monitor your email or account for a response, which typically includes a Student Aid Report (SAR) or direct communication from the lender. This document outlines your potential loan amounts and conditions.

Next, review all the details carefully to ensure there are no errors. You may need to provide additional documentation or information to complete the process. Once everything is finalized, you'll receive a financial aid offer from your school or a loan approval from your private lender. At this stage, review the terms, decide how much you need to borrow, and formally accept the offer. It's crucial during this period to understand your repayment options and future responsibilities, aligning them with your financial planning.

What are alternatives to student loans?

When considering how to take out a student loan, it's wise to explore alternatives to borrowing. Before diving into the various options, here’s a quick look at the landscape: with 43 million borrowers owing over $1.6 trillion, student debt has become a major burden for many. Alternatives to student loans include:

1. Scholarships and Grants: These do not require repayment and can significantly reduce education costs.
2. Work-Study Programs: These provide students with part-time jobs, often on campus, to help fund their education.
3. Savings and Family Contributions: Using personal savings or family help can decrease the amount needed from loans.
4. Tuition Reimbursement Programs: Some employers offer tuition assistance as part of their benefits package, which can cover part of your education costs.

By exploring these options, students can potentially lessen their reliance on loans and reduce future financial stress.

How to Get a Low Interest Student Loan?

To secure a low-interest student loan, it's crucial to be strategic about where and how you apply. With the average student loan debt hovering around $39,981 and interest rates varying significantly, finding the lowest possible rate can greatly reduce the total cost of your education. Here are some steps to follow:

1. Check Your Credit Score: Higher scores can qualify you for lower interest rates.
2. Apply for Federal Loans First: They often have lower rates compared to private loans.
3. Compare Private Lenders: Look for the best rates and terms.
4. Consider a Co-Signer: A creditworthy co-signer can help you secure a lower rate.
5. Choose the Right Repayment Plan: Some plans offer lower interest rates for consistent repayment.

By understanding how to take out a student loan and comparing your options carefully, you can manage your educational expenses more effectively.

How can specialized student loans support your career goals?

When pursuing a specific career path, like nursing, specialized student loans can offer tailored benefits to align with your professional goals. Federal and private lenders often provide loans specifically designed for students in high-demand fields, which may include lower interest rates, flexible repayment options, or even forgiveness programs upon working in designated industries. Exploring these options can reduce financial stress and provide a clear strategy for repayment.

For instance, aspiring nurses can look into funding opportunities specifically catered to their field. By focusing on industry-relevant loan programs, students can maximize their chances of financial success while pursuing a career that meets critical societal needs. If you're considering such specialized loan options, learn more about how to secure student loans for nursing school to support your educational and career aspirations.

Specialized loans often require careful research to understand terms, eligibility, and post-graduation commitments such as working in underserved areas. However, they can be an invaluable resource for students aiming to achieve both personal and professional milestones.

What should you consider before getting a student loan?

Before deciding on how to take out a student loan, it’s essential to consider several key factors to ensure you make a well-informed decision. As of the latest data, 43.2 million borrowers have federal student loan debt, highlighting the commonality and impact of such financial commitments. Here's what you should think about:

1. Financial Stability: Assess your future earning potential to ensure you can handle repayment.
2. Loan Terms: Understand the length of the loan and the interest rates, which affect your total payment over time.
3. Repayment Flexibility: Consider options like deferment and forbearance, which 61.2% of borrowers have utilized.
4. Forgiveness Opportunities: Explore if your career path may qualify for loan forgiveness programs, noting that a small percentage of such applications are approved.
5. Debt Impact: Reflect on how this debt might impact your financial goals, such as buying a home or saving for retirement.

Understanding these aspects can help you manage your debt responsibly and avoid overburdening yourself financially.

Do Medical School Loans Cover Living Expenses?

Medical school loans often have unique disbursement structures designed to address both tuition and ancillary costs. While many federal programs primarily focus on educational expenses, certain loan offerings allow for the inclusion of living expenses as part of the overall funding package. Private lenders sometimes provide tailored options that allocate specific amounts toward costs such as housing, food, and transportation during medical training. It is essential for applicants to review disbursement guidelines and eligibility criteria thoroughly, as these vary by program and lender. For further details on this aspect, interested borrowers can review the options available by clicking do medical school loans cover living expenses.

What are the advantages of federal loans over private loans?

Federal student loans offer several advantages over private loans, which can be crucial for anyone exploring how to take out a student loan. Notably, as of 2023, there was a decline of 2.09% in national student loan debt, reflecting changes in borrowing and repayment trends. Here are some benefits of federal loans:

1. Lower Interest Rates: Federal loans generally have lower interest rates compared to private loans, making them more affordable over the long term.
2. Flexible Repayment Plans: They offer various repayment plans, including income-driven repayment plans that adjust based on your income, which are not typically available with private loans.
3. Subsidized Interest: For eligible students, the government covers the interest on subsidized Stafford loans while you are in school and for a period after graduation, reducing the overall cost.
4. Loan Forgiveness Programs: Federal loans are eligible for programs like Public Service Loan Forgiveness, which can forgive remaining debt after qualifying payments for those working in public service jobs.
5. Deferment and Forbearance Options: Borrowers can have more lenient options for postponing payments if they encounter financial difficulties, with 65.8% of federal student loan debt being in forbearance as of September 2023.

These features make federal loans a more secure choice for students who need financial aid to pursue higher education. The chart below shows student loan debt by loan type.

What are the differences between direct subsidized loans and direct unsubsidized loans?

Direct subsidized loans and direct unsubsidized loans are two primary types of federal student loans, each with distinct benefits tailored to different student needs. Understanding these differences is essential when figuring out how to take out a student loan.

Direct subsidized loans are particularly beneficial for undergraduate students who demonstrate financial need. The U.S. Department of Education pays the interest on these loans while the student is in school at least half-time, during the six-month grace period after graduation, and during any deferment periods. This subsidy can significantly reduce the total amount owed over the life of the loan. As of the latest data, subsidized loans make up 18% of all Stafford loans issued.

In contrast, direct unsubsidized loans are available to both undergraduate and graduate students and do not require a demonstration of financial need. The borrower is responsible for the interest during all periods, whether in school, during grace periods, or deferment. This can lead to a higher total repayment amount over the life of the loan. Unsubsidized loans constitute a larger portion, 35.6%, of Stafford loans. This availability makes them a common choice for many students, regardless of their financial status.

Is taking a student loan worth it?

Deciding whether taking a student loan is worth it can be complex and depends on individual circumstances and goals. One in every five Americans holds student debt. As student debt levels have soared over the years, with a total increase of 267.1% from 2006 to 2023, the financial burden on graduates continues to grow. Yet, understanding the implications of this debt is crucial, especially when considering the average debt balances for borrowers under 25 ($14,560) and those between 25 and 34 years old ($32,950).

Student loans can be a gateway to higher education and increased earning potential, especially for those pursuing degrees in fields with high returns on investment. Federal student loans, making up 92.8% of all student debt, often have lower interest rates and more flexible repayment options compared to private loans. For many, these loans provide the only means to cover college fees and achieve educational aspirations. However, with 26.7 million borrowers in forbearance and a significant portion of debt remaining unpaid, it's essential to weigh these factors carefully. The benefits of earning a degree should ideally outweigh the costs and long-term financial commitment of taking out student loans.

How to Choose the Right Type of Loan for Specialized Careers

Selecting the right type of student loan is especially important for those pursuing specialized careers, as these fields often involve unique educational costs. For instance, students attending aviation school typically face substantial fees for flight training and equipment. Federal loans may be limited in accommodating such specific expenses, making private loans an attractive alternative.

When evaluating your options, consider specialized loans tailored for your intended career path. Some private lenders offer loans with terms and features designed for industries like aviation, healthcare, or law. These loans may include perks such as deferred payments during training or flexible repayment structures. Such features are essential for reducing financial stress as you complete skill-based certifications or licensing requirements.

If you're exploring funding options for flight training, for example, a flight school loan is a tailored solution that can help cover tuition as well as associated costs like simulators and examination fees. Researching these options thoroughly will allow you to align your loan choice with both your financial situation and your long-term career goals.

Ultimately, specialized loans provide an opportunity to address the distinct demands of niche professions, ensuring you can focus on building a successful career without financial distractions. Always understand the loan terms and repayment expectations to make an informed decision.

Which Repayment Plan Best Aligns with My Financial Goals?

Evaluate your repayment models by comparing structured, income-driven, and flexible plans that adjust to future income changes. Analyze lender-specific benefits, including exclusive features available through College Ave student loans repayment options, to determine which options minimize long-term costs while protecting against fluctuations in economic conditions. Consider how projected career growth, budget constraints, and evolving market trends may affect the sustainability of your chosen repayment strategy, ensuring that your financial plan remains resilient over time.

What are the common pitfalls to avoid when taking out a student loan?

Carefully evaluate your borrowing strategy to sidestep critical errors. Avoid overlooking the fine print regarding interest accrual, hidden fees, and repayment conditions that could lead to unnecessarily high costs. Ensure you fully assess eligibility requirements and potential repercussions on your credit profile. Compare multiple lenders and loan products to confirm that the terms align with both your current financial situation and long-term career objectives. Additionally, consider alternative funding options such as 1 year graduate programs when specialized educational opportunities may better suit your goals.

How Does Your Degree Program Choice Impact Your Student Loan Repayment?

Selecting the right degree program can play a pivotal role in managing your future financial obligations. Carefully evaluating factors such as program duration, tuition costs, and post-graduation employment prospects is essential. Programs with a strong track record of quick degree completion and solid employment outcomes may reduce the overall time you spend repaying your loans. In some cases, students may opt for less intensive courses, like the easiest bachelor degree to get, which can lead to lower educational expenses and an expedited entry into the workforce. Considering these aspects can ultimately contribute to a more manageable loan repayment plan and support long-term financial stability.

Is an Accelerated Graduate Program a Smart Financial Investment?

Accelerated graduate programs offer a compressed timeline for degree completion, reducing both tuition expenses and opportunity costs. Such programs are designed to streamline coursework without compromising academic rigor, enabling students to enter the workforce sooner with enhanced credentials. Evaluating these options involves examining program accreditation, curriculum structure, and post-graduation employment metrics to ensure they align with your career and financial objectives. For those looking to balance educational demands with a swift return on investment, consider exploring the fastest masters online as a viable option.

Can a Dual Degree Program Improve Your Student Loan Outcomes?

Dual degree programs can offer an integrated educational approach that not only blends expertise across two fields but may also contribute to a more favorable financial profile. By potentially reducing the overall duration and cost of obtaining credentials through overlapping coursework, these programs can limit the total amount borrowed. Furthermore, the diversified skill set acquired can enhance marketability and lead to higher earning potential, which can ease future loan repayment processes. Evaluating program structures alongside employment outcomes is essential when assessing the financial viability of such pathways. For more targeted options, consider exploring opportunities with universities with dual degree programs.

Is Refinancing or Consolidation a Viable Option for Lowering Your Student Loan Costs?

Refinancing or consolidating your student loans can create opportunities for lower interest rates and improved monthly payment terms; however, it requires a thorough evaluation of your financial profile and long-term goals. When considering refinancing, compare fixed versus variable rates, as well as any associated fees, to ensure that the new terms provide real savings without sacrificing essential borrower protections found in federal loan programs. Consolidation might simplify repayment by combining multiple loans into a single payment, but be mindful that this option may extend the repayment period and potentially increase the overall interest paid. Lenders typically assess your credit history, income stability, and debt-to-income ratio, which means refinancing is best suited for borrowers with a strong financial profile. For individuals expanding their education options, evaluating opportunities at affordable online colleges may also support a broader strategy to manage and reduce debt.

How Can Student Loans Impact Your Long-Term Financial Security?

Student loans can influence long-term financial stability by affecting your credit profile, borrowing capacity, and overall net worth. Consider that structured repayment plans, diligent budgeting, and strategies focused on principal reduction can help mitigate risks such as limited future credit access or slower progress toward financial goals. Aligning your debt management with retirement planning and investments is key to maintaining sustainable wealth-building. For instance, comparing specialized options like dental school loans may offer tailored benefits that support both immediate educational needs and long-term financial security.

Are Online Colleges a Practical Alternative for Reducing Student Loan Debt?

Online education can substantially lower overall expenses by reducing tuition, commuting, and ancillary fees. This delivery method often enables students to maintain full-time employment, thereby mitigating reliance on excessive student loans. Moreover, many accredited online programs offer competitive financial aid packages that streamline the borrowing process while ensuring quality education. For instance, reviewing resources such as the best online colleges with financial aid options? can help determine if an online modality aligns with your financial strategy and career objectives. Evaluating program accreditation, cost comparisons, and career support services further ensures that the selected online institution meets both your educational and long-term financial goals.

Key Findings

• As of the fourth quarter of 2023, the total student loan debt in the U.S. stood at approximately $1.727 trillion, with federal loans comprising 92.8% of this amount.
• The average student loan debt for federal borrowers is $37,088, whereas the combined average of federal and private student loan debt is about $39,981 per borrower.
• In 2023, the national student loan debt saw its first-ever annual decline, decreasing by 2.09%.
• Among federal student loans, Stafford Loans constitute 53.6% of the debt, with subsidized Stafford loans making up 18% of that figure.
• Approximately 3.3% of applications for Public Service Loan Forgiveness (PSLF) have been approved since the program's inception, with a total of $46.8 billion in federal student loans forgiven through this program.

Other Things You Should Know About How to Take Out a Student Loan

Is there a way to get out of student loans?

Yes, there are several ways to manage or get out of student loans, but they usually require specific qualifications. One common method is through loan forgiveness programs, which are available for federal loans if you work in certain public service jobs or meet other specific criteria. For example, the Public Service Loan Forgiveness (PSLF) program cancels the remaining debt after 10 years of qualifying payments for people working in government or non-profit sectors. Another option is income-driven repayment plans, which adjust your monthly payments based on your income and forgive any remaining balance after 20-25 years.

For private loans, options are more limited. Some lenders may offer loan modification or refinancing options to lower your payments. In extreme cases, like disability or bankruptcy, it might be possible to have the debt discharged, though these are challenging to qualify for and should be considered as a last resort.

Where can I borrow money as a student?

As a student, you can borrow money from federal and private lenders. Federal loans often offer lower interest rates and more flexible repayment options compared to private loans. To apply for federal student loans, you need to fill out the FAFSA. This application will determine how much you can borrow based on your financial needs.

If federal loans do not cover all your educational expenses, private loans from banks, credit unions, and other financial institutions might be necessary. It’s important to compare different private lenders to find the best interest rates and terms. Always review the terms carefully and consider how the repayment plan will fit into your financial future.

How do you get approved for a loan?

Getting approved for a loan typically involves demonstrating your ability to repay the borrowed amount. For most types of loans, including personal, auto, and some private student loans, your credit score, income, and debt-to-income ratio are crucial factors. To improve your chances, maintain a good credit score by paying bills on time and keeping your debt levels low.

When applying, you’ll need to provide personal information, proof of income, and, in many cases, a co-signer with good credit if your history isn’t strong. It’s also helpful to have a stable job or a consistent income source. Lenders are more likely to approve your loan application if they see that you reliably manage your finances.

How do I check if I qualify for a loan?

To check if you qualify for a loan, start by reviewing the lender’s requirements, which are typically listed on their website. For most loans, factors like your credit score, income, employment status, and debt-to-income ratio are key to determining eligibility. Many lenders offer pre-qualification tools on their websites, which allow you to see if you're likely to qualify without affecting your credit score.

If you’re considering a student loan, you’ll need to fill out the FAFSA to determine your eligibility for federal student loans. The process will provide you with details about what loans and grants you can receive based on your financial situation. For private loans, direct inquiries to the lender or a pre-qualification can give you an initial idea of what you might receive.

References:

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3. Federal Student Aid. (n.d.). When it comes to paying for college, career school, or graduate school, federal student loans can offer several advantages over private student loans.
4. Fowers, A., & Douglas-Gabriel, D. (2024, January 19). Who has student loan debt in America? Washington Post.
5. Hanson, M. (2024b, March 3). Student Loan Debt Statistics [2024]: Average + total debt. Education Data Initiative.
6. Streaks, J. (2024, June 11). Average American debt in 2024: Household debt statistics. Business Insider.