[hen-ui-dynamic-experience placement=”aboveTheFold” /] [hen-ui-card variant=”background-white” border=”stroke”] [hen-ui-flex direction=”column” gap=”lg”] [hen-ui-heading variant=”h2″]Key Takeaways[/hen-ui-heading] [hen-ui-list variant=”unordered” bullet-style=”check” marker-color=”secondary”] [hen-ui-list-item][hen-ui-text variant=”b4″]A student loan is borrowed money for college expenses that students must repay with interest after graduation.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″]Federal loans typically have lower interest rates and more flexible repayment options. In contrast, private loans generally have higher costs and may require payments while students are in school.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″]Students should submit the FAFSA, seek grants and scholarships, and borrow only what they need to minimize debt and avoid defaults.[/hen-ui-text][/hen-ui-list-item] [/hen-ui-list] [/hen-ui-flex] [/hen-ui-card] [hen-ui-text variant=”b4″ class=”heading-2″]Once you’ve decided to go to college, understanding how student loans work is the next big step.[/hen-ui-text] [hen-ui-text variant=”b4″]Student loans help students pay for college, filling financial gaps and providing essential funds to cover educational expenses. It’s important to fully understand the application process, disbursement, and repayment requirements associated with student loans, to ensure that you make responsible, effective decisions about funding your education.[/hen-ui-text] [hen-ui-text variant=”b4″]Degree-seekers at public colleges and universities can apply for federal financial aid and student loans through the free application for federal student aid — more commonly called the FAFSA. Students can apply for private loans as well, but the terms and conditions for those vary significantly.[/hen-ui-text] [hen-ui-text variant=”b4″]Not all student loans are alike, and it can be confusing to figure out which types of loans best meet your needs. This guide provides information on available forms of student aid, how you can benefit from them, and other options for financial assistance.[/hen-ui-text] [hen-ui-heading variant=”h2″]What Is a Student Loan?[/hen-ui-heading] [hen-ui-text variant=”b4″]A student loan is a lump sum of money that a student receives from the federal government, their state government, or a private company, which they can use toward tuition or other school expenses. However, they must pay that money back after graduation, plus interest.[/hen-ui-text] [hen-ui-text variant=”b4″]In addition to scholarships, grants, and work-study programs, many learners use student loans to fund their education. Student loans can be a helpful tool if you use them responsibly. [hen-ui-link href=”https://studentloanhero.com/student-loan-debt-statistics/”]Student Loan Hero[/hen-ui-link] reports that 69% of students in the class of 2019 took out loans to cover college expenses.[/hen-ui-text] [hen-ui-text variant=”b4″]Student Loan Hero’s data also indicates that students in 2019 graduated with an average debt of $29,000. It’s best to try to borrow as little as possible to minimize the long-term costs; before committing to a large loan, research starting salaries in your field to determine your ability to [hen-ui-link href=”/resources/college-finances/about-student-loans/”]pay them back[/hen-ui-link] after graduation.[/hen-ui-text] [hen-ui-heading variant=”h2″]Loan Forgiveness Programs[/hen-ui-heading] [hen-ui-text variant=”b4″][hen-ui-link href=”https://studentaid.gov/announcements-events/coronavirus”]In early 2020[/hen-ui-link], the Office of Federal Student Aid suspended student loan payments, paused collections on defaulted student loans, and eliminated interest rates. Student loan payments restarted on October 1, 2023 for most borrowers. However, the Biden administration provided a period until September 30, 2024, where payments were due but interest did not capitalize. These measures only apply to federal student loans, however — not private student loans.[/hen-ui-text] [hen-ui-text variant=”b4″]As always, current and future students should complete FAFSA forms as accurately as possible and update any information regarding their financial situations.[/hen-ui-text] [hen-ui-dynamic-experience placement=”editorialListings” /] [hen-ui-heading variant=”h2″]Types of Student Loans[/hen-ui-heading] [hen-ui-text variant=”b4″]There are two primary student loan types: private and federal. Both types can help reduce financial anxieties and build your credit score, but differ in a few distinct ways.[/hen-ui-text] [hen-ui-heading variant=”h3″]Federal Student Loans[/hen-ui-heading] [hen-ui-text variant=”b4″]Student loans from the federal government offer many advantages, such as fixed interest rates. Federal student loans also offer more flexible repayment plans and access to loan forgiveness programs under certain conditions.[/hen-ui-text] [hen-ui-text variant=”b4″]Typically, the amount you can borrow each year depends on your education level and status as a dependent or independent student. Yearly loan limits can vary from $5,500-$12,500 for undergraduates. Loan limits for graduate students can reach up to $20,000.[/hen-ui-text] [hen-ui-accordion variant=”no-background” theme=”tertiary”] [hen-ui-accordion-item title=”Direct Subsidized Loans”] [hen-ui-text variant=”b4″]Direct subsidized loans provide financial aid to undergraduate students who demonstrate outstanding financial need. The loan amount may not exceed the student’s need, but the borrower does not need to pay any of the accrued interest during their schooling or for the first six months after graduation.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”Direct Unsubsidized Loans”] [hen-ui-text variant=”b4″]All undergraduate and graduate students can receive direct unsubsidized loans, regardless of financial need. Your school determines the amount of the loan you receive based on other financial aid you have accessed. Unlike subsidized loans, unsubsidized loans require students to pay interest as soon as they begin repaying the loan.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”Direct PLUS Loans”] [hen-ui-text variant=”b4″]Direct PLUS loans offer access to federal financial aid for graduate and professional degree students, as well as the parents of dependent undergraduate enrollees. These loans require the borrower to pay interest during all periods. People who take out a direct PLUS loan also need to pay an origination fee, which is deducted from the loan disbursement.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”Direct Consolidation Loans”] [hen-ui-text variant=”b4″]Direct consolidation loans allow you to combine multiple federal loans into a single federal loan. These loans offer lower monthly payments and more diversity in repayment plans, which help decrease the likelihood of default. They also enable you to apply for certain loan forgiveness programs. To find out more about how to consolidate student loans, contact your school’s loan administrator.[/hen-ui-text] [/hen-ui-accordion-item] [/hen-ui-accordion] [hen-ui-heading variant=”h3″]Private Student Loans[/hen-ui-heading] [hen-ui-text variant=”b4″]Private loans usually come from banks or other private companies and often end up costing more than federal loans due to interest rates. They can also require students to start making repayments while still in school. Most students only apply for private loans after maxing out their federal financial aid.[/hen-ui-text] [hen-ui-text variant=”b4″]Before committing to one, consider the costs associated with private student loans. You will need to pay a lender fee to the vendor, who may not allow you much freedom in choosing a loan repayment plan, and the terms for repayment vary by vendor.[/hen-ui-text] [hen-ui-text variant=”b4″]Additionally, private loans are often unsubsidized and may come with an annual cap, limiting the amount of aid available. Interest rates for private loans are also variable. Your credit history, along with your cosigner’s, can affect all of these factors — especially the interest rate.[/hen-ui-text] [hen-ui-heading variant=”h2″]How Are Student Loans Paid Back?[/hen-ui-heading] [hen-ui-text variant=”b4″]Degree-seekers have many options when it comes to federal and private student loan repayment programs. Common repayment formats include:[/hen-ui-text] [hen-ui-list variant=”unordered” bullet-style=”bullet”] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Income-Based Repayment:[/hen-ui-text] The borrower pays 15% of their income monthly for up to 25 years.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Standard Repayment Plans:[/hen-ui-text] The recipient pays a fixed amount monthly for up to 10 years. Payment rates vary based on the loan amount and interest rate.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Graduated Repayment Plans:[/hen-ui-text] Over 10 years, a student makes monthly payments that start out low and gradually increase every two years.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Extended Repayment Plans:[/hen-ui-text] The borrower makes very low monthly payments over the course of 25 years.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Revised Pay-as-You-Earn Repayment Plans:[/hen-ui-text] You pay 10% of your income each month over 20-25 years.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Income-Contingent Repayment Plans:[/hen-ui-text] Students make very low monthly payments adjusted to low-income work for over 25 years.[/hen-ui-text][/hen-ui-list-item] [/hen-ui-list] [hen-ui-text variant=”b4″]Federal student loans typically allow for a six-month grace period after graduation before requiring repayments. Once the grace period ends, you must begin making payments monthly and on time. Interest is added to your payment each month, usually at a fixed rate.[/hen-ui-text] [hen-ui-text variant=”b4″]When taking out multiple federal loans, you may want to consider a direct loan consolidation program. These programs combine federal loans from different lenders into a single loan that you can repay using a standard, extended, or income-based plan.[/hen-ui-text] [hen-ui-text variant=”b4″]It typically takes 10 years to repay a federal student loan, while private student loans usually take 5-15 years.[/hen-ui-text] [hen-ui-text variant=”b4″]There are some situations where borrowers can access student loan forgiveness, including:[/hen-ui-text] [hen-ui-list variant=”unordered” bullet-style=”bullet”] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Public Service and Teacher Loan Forgiveness:[/hen-ui-text] This option forgives remaining loans for public service workers and teachers who work in high-need areas for a minimum period of time.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Closed School Discharge:[/hen-ui-text] Students whose schools close before they can earn a degree often receive loan forgiveness.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Total and Permanent Disability Discharge:[/hen-ui-text] This option forgives all loans for students who have permanent disabilities.[/hen-ui-text][/hen-ui-list-item] [hen-ui-list-item][hen-ui-text variant=”b4″][hen-ui-text tag=”strong” weight=”bold”]Death or Bankruptcy:[/hen-ui-text] These two cases result in forgiveness of most loans, though in the case of bankruptcy, you must apply for student loan forgiveness separately.[/hen-ui-text][/hen-ui-list-item] [/hen-ui-list] [hen-ui-text variant=”b4″]The Department of Education’s [hen-ui-link href=”https://studentaid.gov/manage-loans/forgiveness-cancellation/”]Federal Student Aid website[/hen-ui-link] covers additional types of loans.[/hen-ui-text] [hen-ui-heading variant=”h3″]What Happens if I Miss a Payment?[/hen-ui-heading] [hen-ui-text variant=”b4″]If you miss payments, your loan can go into default. Federal loans allow nine months of missed payments before you default on a loan, but some private loans only allow one missed payment.[/hen-ui-text] [hen-ui-text variant=”b4″]Loan default can damage your credit score, and it allows the federal government to use your tax refunds to offset your debt.[/hen-ui-text] [hen-ui-text variant=”b4″]Given these risks, you should carefully choose your repayment plan to ensure that you can meet your monthly payments. You can potentially escape loan default by applying for loan rehabilitation or loan consolidation, both of which allow you to negotiate with your lender for lower monthly payments.[/hen-ui-text] [hen-ui-text variant=”b4″]If you do miss a payment, there are a few ways you can mitigate the damage. First, applying for loan forbearance or deferment suspends payments for a short period. Unfortunately, interest may still accrue during this period, increasing the amount you owe and halting progress toward loan repayment or forgiveness. Deferment and forbearance also give you time to change your repayment plan to an income-driven pathway that aligns better with your earnings.[/hen-ui-text] [hen-ui-heading variant=”h2″]How to Get a Student Loan[/hen-ui-heading] [hen-ui-text variant=”b4″]The process for [hen-ui-link href=”/resources/college-finances/about-student-loans/”]taking out a student loan[/hen-ui-link] can vary, depending on the type of loan and how much financial support you need. The following set of steps describes the most common process for pursuing financial aid, whether for a traditional or [hen-ui-link href=”/resources/college-finances/online-college-financial-aid/”]online program[/hen-ui-link]:[/hen-ui-text] [hen-ui-list variant=”ordered” bullet-style=”check”] [hen-ui-list-item][hen-ui-heading variant=”h4″]Complete Your Free Application for Federal Student Aid[/hen-ui-heading] Start by [hen-ui-link href=”https://thebestschools.org/resources/college-finances/online-college-financial-aid/”]completing the FAFSA[/hen-ui-link] to determine your eligibility for federal financial aid. Repeat this step every year for as long as you wish to receive federal aid.[/hen-ui-list-item] [hen-ui-list-item][hen-ui-heading variant=”h4″]Apply for Grants and Private Scholarships[/hen-ui-heading] Grants from the federal government and [hen-ui-link href=”/resources/college-finances/scholarships/”]scholarships from private organizations[/hen-ui-link] can each take a chunk out of your education expenses.[/hen-ui-list-item] [hen-ui-list-item][hen-ui-heading variant=”h4″]Communicate With Your School[/hen-ui-heading] Your school’s financial aid office will work with you to apply any federal aid you receive to your account.[/hen-ui-list-item] [hen-ui-list-item][hen-ui-heading variant=”h4″]Complete Prep Work for Your Federal Loans[/hen-ui-heading] If you receive federal student loan money, you may need to complete entrance counseling to understand your responsibilities as a borrower. You will then need to sign a master promissory note for each loan.[/hen-ui-list-item] [hen-ui-list-item][hen-ui-heading variant=”h4″]Apply for Private Student Loans[/hen-ui-heading] Once you’ve maxed out all other forms of aid, consider a private student loan from a reputable lender to make up the difference. Always check terms and conditions thoroughly before committing to a loan.[/hen-ui-list-item] [/hen-ui-list] [hen-ui-heading variant=”h2″]Frequently Asked Questions[/hen-ui-heading] [hen-ui-accordion variant=”no-background” theme=”primary”] [hen-ui-accordion-item title=”How Long Can You Get Federal Financial Aid?”] [hen-ui-text variant=”b4″]There is no time limit on federal direct unsubsidized loans or PLUS loans. For all other federal loans, you can only receive aid for 150% of the published length of the program you intend to complete. For example, you can only receive federal aid for a four-year bachelor’s degree for six years.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”How Do You Qualify for Federal Loans?”] [hen-ui-text variant=”b4″]To qualify for federal loans, you must first present proof of citizen or eligible noncitizen status, along with a valid social security card, selective service registration, and a high school diploma or equivalent with a 2.0 minimum GPA. Next, fill out a FAFSA form and enroll in an eligible school on a part- or full-time basis.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”Is There an Income Limit for Federal Student Loans?”] [hen-ui-text variant=”b4″]There is no income cutoff for federal student aid. However, your income will influence the amount of student aid you can receive. Completing your FAFSA calculates your estimated need based on the cost of attendance at your school minus your expected family contribution.[/hen-ui-text] [/hen-ui-accordion-item] [hen-ui-accordion-item title=”How Do You Get Approved for a Private Student Loan?”] [hen-ui-text variant=”b4″]Private student loans set their own loan approval requirements, which typically include age, education, and citizenship requirements; enrollment in an eligible school; and an adequate credit score and income. Private lenders may also require a cosigner on your loan. The lender typically sends funds directly to your school.[/hen-ui-text] [/hen-ui-accordion-item] [/hen-ui-accordion] [hen-ui-flex direction=”column” gap=”lg”] [hen-ui-expert-bio name=”Melissa Sartore” img-src=”https://res.cloudinary.com/highereducation/image/upload/f_auto,fl_lossy,q_auto:eco/v1618860719/TheBestSchools.org/hero-images/Experts/author-no-image.jpg” img-alt=”Melissa Sartore” layout=”horizontal” background=”white” /] [hen-ui-text variant=”b4″ slot=”contentRight”][hen-ui-link href=”/about/#writers/”]Melissa Sartore[/hen-ui-link] holds a Ph.D. in history from the University of Wisconsin-Madison. Her BA and MA in history are from Western Illinois University. A medievalist by training, she has published on outlawry in medieval England with additional publications on outlaws in popular culture and across geographic and historical boundaries.[/hen-ui-text] [/hen-ui-flex] [hen-ui-text variant=”b4″ class=”text-right text-sm”]Header Image Credit: pixelfit | Getty Images[/hen-ui-text] [hen-ui-heading variant=”h2″]Learn more, do more.[/hen-ui-heading] [hen-ui-heading variant=”h5″]More topic-relevant resources to expand your knowledge.[/hen-ui-heading] [hen-ui-article-row variant=”slider” ids=”304,304,304″][/hen-ui-article-row] [hen-ui-section-header title=”Popular with our students.” /] [hen-ui-article-row variant=”2-col” ids=”970,1538,905″][/hen-ui-article-row]