Step-by-Step Guide: How to Apply for Student Loans

Step-by-Step Guide: How to Apply for Student Loans

When it comes to paying for college, the loan process can be confusing. There are a lot of options, but they are far from equal.

It’s important to make sure you understand how to apply for each type of loan, and that your student focuses on low-cost loans before taking on more expensive debt.

As you may know, focusing on federal loans will help keep costs down. There are subsidized loans and then there are unsubsidized loans, and understanding the difference between the two is key.

As a parent, you can also take out Parent PLUS loans to help fund your student’s education.

After the idea of federal loans has been exhausted and you still find you are in need of additional aid, private loans are an option.

It’s vital to know critical information about how they work and finding and applying for the right ones, so if you need to go the route of choosing a private student loan, you’ll know what to research and how to compare loans to get your best offer. 


Applying for Direct Federal Student Loans

You and your student should start the course of financing college by applying for Direct Federal Student Loans. This portion of the loan process is actually quite simple.

  • Complete the FAFSA (or renewal FAFSA, for returning students).
  • All students who submit a FAFSA are eligible for Federal Direct student loans, regardless of family need or income level.
  • The school will send a financial aid letter letting you know if you qualify for subsidized and/or unsubsidized Federal Direct loans, and how much of each.
  • Once you know what school your student has chosen, contact the appropriate financial aid office (or they may direct you to your student’s portal) to accept the aid and loans.
  • Fill out any required paperwork and make sure they are sent by the stated deadlines.

The financial aid letter will let you know what Direct Subsidized Loans and Direct Unsubsidized Loans your student qualifies for. However, the Master Promissory Note (MPN) and other paperwork will be required before the money is sent.

[Making Sense of Financial Aid Awards]


Applying for Federal Parent PLUS Loans

Applying for a Parent PLUS loan starts the same as other federal loans – with the FAFSA. Afterwards, however, you need to proceed with your own FSA ID and take some additional steps.

  • Make sure the FAFSA has been completed and submitted.
  • All parents are eligible to apply for a Parent PLUS loan. Most parents are approved, except if those that have adverse credit issues.
  • Sign in to the StudentLoans.gov website with your own FSA ID. Don’t use your student’s ID – the PLUS options won’t be available.
  • Follow the directions for the PLUS loan.
  • Once you’ve received approval, fill out the required Master Promissory Note (MPN). The funds are then eligible to be released to the school.

Parents (mother and father) may apply separately for Federal PLUS loans. However, they will each need to do so under their own FSA ID. Leftover funds may be distributed to either the parent or the student, whichever the parent requests.

[What are Federal Parent PLUS loans?]


The Loan Process for Private Loans

Applying for private loans is a bit more complex because each bank has their own requirements. Fortunately, this loan process doesn’t have to be extremely time-consuming if you’re prepared. Here are the basic steps:

  • Gather your personal information. This includes the borrower’s social security number, phone number, current and previous addresses, income statements, and the value of current assets.
  • Determine how much you want to borrow. This will require you to know the cost of the school, along with the financial aid package and scholarships you’ve been offered so far.
  • Compare lenders and choose who to apply with. Your school may send you a list of preferred lenders but always research all your options and feel free to use other resources to compare various private loans.
  • Apply with one or more private lenders. Generally this is easy to do online, and all information should be 100% factual.
  • Make sure you have a co-signer if you expect you’ll need one (students almost always do.)
  • Once the application is submitted, the lender will review it and let you know whether the borrower is approved, and how much they are approved to borrow.
  • Compare the TOTAL COST of all the loans you applied for before deciding which one to take. Use our Road2College Loan Calculator to compare up to 5 loans at once.  Just enter in the basic loan information and the calculator provides the total cost of the loan and what you’re monthly payments will be. Now compare across loans in and apples to apples comparison to make an informed decision.

The lender will provide loan documents along with their approval. These documents will let you know the interest rates, repayment terms, and other costs associated with the loan.

Once you choose the appropriate loan, the borrower can sign the loan documents. If the student is getting the loan, they will also need to complete a Private Loan Self-Certification Form for each loan. The form is available from the school’s financial office. The money will be sent to the school, and the balance will be sent to the borrower.

Because private loans require creditworthiness and specific income requirements, it’s likely that your student will require a cosigner. It may be helpful to look for private loans that have a release clause for the cosigner. This will remove the extra party from the loan after a certain number of payments are made on time.

[Not All Private Student Loans Are Equal: Shop Around]


Choosing the Best Loan Offer

As you move through the loan process, you’ll be making choices about the best loan offers. It’s easy to understand that federal loans are the best deal – the interest rate is fixed, and the repayment terms are very flexible.

After that, how do you choose? You can use our Student Loan Calculator to compare loan offers and choose the best one. When terms and conditions vary significantly, it’s important to consider every detail.



Interest RateInterest Rate & Other DiscountsRepayment Options (Monthly) Cosigner Release
sofi4.23% – 11.26% (Fixed)

1.84% – 11.66% (Variable)
$250 principal balance reduction benefit and 0.25% discount with autopayImmediate repayment, interest-only, fixed monthly payments in school, fully deferredYesCHECK RATE
College Ave Student Loans3.34% - 12.99% (Fixed)

1.04% - 11.98% (Variable)
Auto-Pay (0.25%)Flat Payment (In-School), Full (principal & interest), Deferred, & Interest-onlyYesCHECK RATE
commonbond-logo13.74% - 10.74% (Fixed)

3.8% - 9.36% (Variable)
Auto-Pay (0.25%)Immediate repayment, interest-only, fixed monthly payments in school, fully deferred YesCHECK RATE
sallie-mae-bank-vector-logo4.25% - 12.59% (Fixed)

1.13% - 11.23% (Variable)
0.25 percentage point deduction for auto debitPay now or later: Make interest payments, pay a fixed $25 payment, or defer payments until after school. YesCHECK RATE
Citizens Bank Student loans4.24% - 11.80% (Fixed)

1.68% - 11.50% (Variable)
Autopay (0.25%)
Loyalty (0.25%)
Full (principal & interest), Deferred, Interest-only, Immediate-RepaymentYesCHECK RATE
LendKey Student Loans4.25% - 12.59% (Fixed)

1.13% - 11.23% (Variable)
Autopay (0.25%)Full payments (Principal and Interest) YesCHECK RATE









Debbie Schwartz is former financial services executive and founder of Road2College and the Paying For College 101 Facebook group. She's dedicated to providing families with trustworthy information about college admissions and paying for college. With data, tools and access to experts she's helping families become educated consumers of higher ed.