Your Complete Guide to Student Loans

Student loans and scholarships are funding options you can use to pay for college. Scholarships are free money you don’t pay back. Loans are borrowed money you pay back over time with interest. Ideally, it’s best to get most of your funding from scholarships, but many students take out loans to help pay for additional college expenses. If you need a loan for school, check out these student loan basics so you can find a loan that works best for you.

Federal loans

The Department of Education sponsors federal loans. Complete your Free Application for Federal Student Aid (FAFSA) to qualify for these loans. Federal loans have the lowest interest rates and flexible repayment options.

Private loans

Private loans often have higher interest rates and fewer protections than federal loans. You can apply for them through a bank, credit union, or loan company. Use them wisely and only when absolutely necessary. 


If you borrow money, you pay back that amount plus interest. When you apply for federal loans, you will see terms like unsubsidized and subsidized. If your loan is subsidized, the Department of Education will not charge you interest while you’re enrolled in classes. Your loan accumulates interest six months after graduation, or if you drop below six class credit hours.

If your loan is unsubsidized, it will collect interest as soon as you take out the loan. If you get a private loan, you’ll probably start paying interest right away. All loans are different. Look at the specifics of each one!

Questions to ask:

  • What is the interest rate?
  • Is the interest variable or fixed? 

Be careful with variable interest rates. The interest rates can start out low and increase at any point. With fixed interest rates, it will remain the same throughout the lifetime of the loan.

Fine print

With all big purchases, always read the fine print. Look for origination fees or administrative fees associated with processing your loan. Some loans also require entrance loan counseling which helps you understand the terms of your loan, repayment, interest, etc. 

Save copies of everything! You may be asked to sign a master promissory note or loan contract. Review all paperwork before completing it.

Student loan balance

It’s easy to forget about your loans if repayment doesn’t begin until after graduation. Make a habit of tracking what you’ve borrowed and accessing that information in real-time. Only borrow what you absolutely need. Your future self will thank you! Federal student loans have a limit. Keep track of how close you are to that limit so you don’t anticipate funding and find out you’ve reached your limit.

Repayment options

You eventually have to repay your loans. Research repayment options, so you can figure out how much you’ll pay each month. Check out loan forgiveness programs, including public service loan forgiveness and employers who may help you repay your loans.

Visit your school’s financial aid office if you have questions about student loans. Understanding your options will serve you (and your wallet) well. Good luck!