Student loans play a crucial role in making higher education accessible to millions of students across America, offering the opportunity to attend college that might otherwise be out of reach.

A college degree can be a key to unlocking a successful career.

However, talk to anyone who’s actively paying off their student loans, and chances are, they’re not thrilled about the burden. A 2023 study found that 54% of U.S. adults with debt feel stressed about it regularly.

These realities highlight the importance of choosing your loan options carefully from the start. Depending on whether you go with public or private loans, you could face vastly different interest rates, repayment terms, and more. Let’s take a closer look at your options and how to set yourself up for a successful repayment journey.

Step 1: Preparing to Apply

When deciding which type of student loan is right for you, it's important to understand the options available. Most students will need to choose between two main types: federal student loans and private loans.

Researching Loan Options

At a basic level, the two main categories are federal loans and private loans. Federal loans are issued by the U.S. government, while private loans come from private financial institutions. Federal student loans are offered by the government, and they typically come with lower interest rates than private loans.

Private student loans, in contrast, are offered by banks or credit unions. Once students have used up their college savings and reached the borrowing limits of federal student loans, they may turn to private loans to cover the remaining costs of their education.

Step 2: Applying for Federal Student Loans

Here’s what you need to know:

Complete the Free Application for Federal Student Aid (FAFSA)

1. Start by completing the Free Application for Federal Student Aid (FAFSA)

This is the form the federal government uses to determine your eligibility for need-based federal aid. You can begin filing your FAFSA as early as October 1 of the year before you plan to start college. For example, the FAFSA for the 2025-2026 school year will open on October 1, 2024.

2. Deadlines and Key Dates for FAFSA

Your school’s deadline: Schools typically set their own early deadlines, which are often before the start of the academic year.

Your state’s deadline: To be eligible for state-based aid, you must submit your FAFSA by the deadline set by your state of legal residence.

Federal deadline: The federal deadline is generally the latest of the three, usually falling on June 30 of the academic year.

3. Comparing Federal Student Loan Offers

These letters will outline the federal financial aid you're eligible for, which may include various types of need-based aid such as:

Federal Direct Stafford Loan

Federal PLUS Loan (for graduate students and parents)

Perkins Loan

Parent PLUS Loan

Grad PLUS Loan

Grants

Work-Study Programs

Step 3: Applying for Private Student Loans

If federal student loans don’t fully cover the cost of your education, private student loans can help fill the gap. These loans are offered by private lenders such as banks, credit unions, and online lending institutions, rather than the government.

Choose a Lender: It’s crucial to compare multiple lenders to find the one that offers the best terms for you.

Submit an Application: Once you’ve selected a lender, complete an online application. You’ll need to provide personal details, information about your school, and your intended major. You may also need to show proof of income.

Loan Approval and Disbursement: If your application is approved, the lender will typically send the funds directly to your school to cover tuition and fees. Any remaining funds are then disbursed to you.

Step 4: Understanding Student Loan Repayment Terms

Before applying for any student loan, it’s essential to fully understand the repayment terms and what it means to be in debt. Both federal and private student loans require you to sign an agreement outlining the repayment terms. With federal student loans, this agreement is known as a Master Promissory Note.

Starting early will help ensure you’re not scrambling at the last minute—especially when it comes to filing the FAFSA. Missing key deadlines means losing eligibility for federal aid for an entire year!