Taking out student loans starts with filling out the Free Application for Federal Student Aid, or FAFSA. This form determines your eligibility for federal loans, grants, and work-study programs. After you submit the FAFSA, your school sends you a financial aid offer that lists the loans you can accept.
Federal student loans are usually the best first choice because they have fixed interest rates and flexible repayment options. Private loans from banks or credit unions are another option, but they often require a credit check or a co-signer. Below, we walk through the entire process step by step.
Step 1: Complete the FAFSA
The FAFSA opens on October 1 each year for the following academic year. For the 2026-2027 school year, you can submit the form starting October 1, 2025. You must complete the FAFSA every year you want financial aid.
You will need your Social Security number, federal income tax returns, bank statements, and records of any untaxed income. If you are a dependent student, your parents must provide their financial information too. The form is free to submit and takes about 30 to 45 minutes.
After you submit, you will receive a Student Aid Report (SAR) that summarizes your information. The SAR includes your Expected Family Contribution (EFC), which schools use to calculate your financial need. Your school then sends you a financial aid offer, usually in the spring.
Step 2: Review Your Financial Aid Offer
Your financial aid offer lists the types and amounts of aid you qualify for, including grants, scholarships, work-study, and federal student loans. Grants and scholarships are free money, so accept those first. Loans must be repaid, so borrow only what you need.
Federal student loans come in two main types: subsidized and unsubsidized. Subsidized loans are based on financial need, and the government pays the interest while you are in school. Unsubsidized loans are not need-based, and you are responsible for all interest from the start.
Here is a quick comparison of federal loan types for undergraduate students:
| Loan Type | Interest Rate (2025-2026) | Who Pays Interest While in School? |
|---|---|---|
| Direct Subsidized Loan | Fixed, set each year | Government |
| Direct Unsubsidized Loan | Fixed, set each year | You |
| Direct PLUS Loan (for parents) | Fixed, set each year | You (parent) |
Interest rates for federal loans are set by Congress each year and are fixed for the life of the loan. For the 2025-2026 academic year, the rate for undergraduate subsidized and unsubsidized loans is 5.50%. You can check the current rates on the official Federal Student Aid website.
Step 3: Accept the Loans You Need
Once you decide how much to borrow, you must accept the loans through your school’s financial aid portal. You can accept the full amount or a smaller amount. It is wise to borrow less than the maximum if you can cover some costs with savings or part-time work.
Before your loan funds are disbursed, you must complete entrance counseling. This online session explains your rights and responsibilities, including how interest accrues and what repayment will look like. You also must sign a Master Promissory Note (MPN), which is a legal agreement to repay the loan.
Your school will disburse the loan funds directly to your account to pay tuition and fees. Any leftover money is given to you to use for books, supplies, and living expenses. Keep track of how much you borrow each year, because your total debt adds up.
Step 4: Consider Private Loans (If Needed)
If federal loans are not enough to cover your costs, you may consider private student loans from banks, credit unions, or online lenders. Private loans often have variable interest rates and fewer repayment protections than federal loans. They also require a credit check, so most students need a co-signer.
Before you apply for a private loan, compare terms from multiple lenders. Look at the interest rate (fixed or variable), fees, and repayment options. Use a loan calculator to estimate your monthly payment after graduation. Always exhaust federal loan options first, because they are safer and more flexible.
Here are some key differences between federal and private loans:
- Federal loans have fixed interest rates, while private loans may have fixed or variable rates.
- Federal loans offer income-driven repayment plans and loan forgiveness programs.
- Private loans may require a co-signer and have stricter credit requirements.
- Federal loans offer deferment or forbearance during financial hardship; private loans may not.
Step 5: Manage Your Loans After Graduation
When you graduate, leave school, or drop below half-time enrollment, your loans enter a grace period. For most federal loans, the grace period is six months. During this time, you do not need to make payments, but interest may accrue on unsubsidized loans.
After the grace period, you must start repaying your loans. The standard repayment term is 10 years, but you can choose other plans. Income-driven repayment plans base your monthly payment on your income and family size. You can also consolidate your federal loans into one loan with a single monthly payment.
Set up automatic payments to avoid late fees and possibly get a small interest rate reduction. If you struggle to make payments, contact your loan servicer immediately. They can help you explore options like deferment, forbearance, or changing your repayment plan.
Practical Summary
Taking out student loans is a straightforward process if you follow these steps: complete the FAFSA, review your financial aid offer, accept only the loans you need, and consider private loans only as a last resort. Always borrow responsibly and keep track of your total debt. After graduation, choose a repayment plan that fits your budget and stay in touch with your loan servicer. By planning ahead, you can manage your student loans successfully and focus on your education.
Frequently Asked Questions
Do I need to fill out the FAFSA to get student loans?
Yes, you must complete the FAFSA to be considered for federal student loans, grants, and work-study. Private lenders do not require the FAFSA, but federal loans are usually a better first option.
Can I take out student loans without a co-signer?
Federal student loans do not require a co-signer, but private loans usually do if you have limited credit history. Many students use a parent or other relative as a co-signer to get a lower interest rate.
How much can I borrow in federal student loans each year?
For dependent undergraduate students, the annual limit ranges from $5,500 to $7,500 depending on your year in school. Independent students may borrow more, and there are lifetime limits as well.
When do I have to start repaying my student loans?
For most federal loans, repayment begins six months after you graduate, leave school, or drop below half-time enrollment. Private loans may have different terms, so check your loan agreement.
What happens if I don’t use all the loan money I accepted?
Your school will refund any leftover loan funds to you, but you can also return them to the lender to reduce your debt. It is best to only borrow what you actually need.
