Step 1: File the FAFSA
The Free Application for Federal Student Aid (FAFSA) is the gateway to all federal student loans, grants, and work-study programs. File as early as possible after October 1 for the following academic year -- some aid is first-come, first-served. The FAFSA determines your eligibility for subsidized and unsubsidized loans based on family financial information.
Federal Direct Subsidized vs. Unsubsidized Loans
Direct Subsidized Loans are available to undergraduates with demonstrated financial need. The Department of Education pays interest on subsidized loans while you are enrolled at least half-time and during the 6-month grace period after leaving school. Unsubsidized Loans are available regardless of need, but interest accrues from disbursement -- if unpaid, it capitalizes (is added to the principal) at repayment.
Private Student Loans
Private student loans are credit-based and typically carry higher rates than federal loans. They do not offer income-driven repayment, Public Service Loan Forgiveness, or federal deferment options. Use private loans only to fill gaps after exhausting federal loan eligibility. Many students require a cosigner with established credit to qualify.
Step 4: Understand Repayment Before You Borrow
Federal loans offer a 6-month grace period after graduation before payments begin, and multiple repayment plan options including standard 10-year and income-driven plans. Before signing a private loan, ask specifically what the grace period is (if any) and whether the rate is fixed or variable -- variable-rate private loans can become significantly more expensive if benchmark rates rise during your repayment period.
Common Student Loan Mistakes
Borrowing the maximum offered rather than the amount actually needed. Living expense loans in particular are often available up to a generous cost-of-attendance figure -- borrowing less now means less interest over the life of the loan.
Choosing a private loan without exhausting federal options first. Federal loans carry borrower protections (income-driven repayment, deferment, forgiveness programs) that private lenders do not offer.
Frequently Asked Questions
Do I need a cosigner for federal student loans? No -- federal loans do not require a credit check or cosigner for most undergraduate borrowers. Private loans usually do require one for students with limited credit history.
When do I need to start repaying? Federal Direct Loans have a 6-month grace period after graduation, dropping below half-time enrollment, or leaving school before payments begin.