How to get student loans: A step-by-step guide for college funding

Going to college is a major milestone many teens look forward to. However, if you're like many students, you may have to borrow money to fulfill your dreams of earning a degree. Colleges and universities charge tuition plus other expenses if you live on campus. While savings and scholarships can offset some of your costs, you can also look into how to get a student loan.

Understanding the basics of student loans

When it comes to financing your education, it helps to understand how student loans work.

What are student loans?

Student loans provide funding exclusively for higher education and related expenses. They can help pay for your tuition, books, housing, and meals while you work toward a degree. Most student loans come with an interest rate and a borrowing cap. So once you complete your studies or leave school, you'll make monthly payments to repay your loan.

Federal vs. private student loans: Key differences

There are two basic types of student loans — federal and private. The U.S. Department of Education issues federal student loans offering key benefits, including forbearance and borrower protections like loan debt relief. 

You can also apply for private student loans from banks or other creditors. Private student loans have fewer protections and may come with stricter borrowing terms.

Subsidized vs. unsubsidized loans: What you need to know

Federal student loans may be subsidized or unsubsidized. Subsidized loans are available for undergraduate students and don't begin accruing interest until after graduation or leaving school.

Unsubsidized student loans start accruing interest from the moment you receive funding, even when you're attending classes.

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Interest rates and repayment terms

Federal student loans typically offer lower interest rates and various repayment options, which may extend 10 years or longer. Private student loans may have higher interest rates and a more rigid repayment plan.

Step 1: Preparing to apply for student loans

Before applying for student loans, it helps to know how much financial assistance you'll need.

Understanding the cost of attendance

Start by calculating your tuition, expected fees, and housing costs. Your university should provide a list of tuition and fees and an estimate for on-campus housing. Many schools offer a meal plan, which you can purchase and use to buy food. The total of all components is your estimated cost of attendance. You can also calculate your expenses by semester or school year.

Determining your budget

Figure out how much you can reasonably afford to borrow for college. Then figure out what your repayment plan would be. Once you accept a loan, you're responsible for paying it in the years after you graduate. If you have any college savings or can work part-time while attending school, that can help compensate for some expenses.

Gathering necessary documents

Before applying for a loan, gather information you may need. Some documents that can facilitate the process include:

• Social Security number

• Driver's license

• Tax returns

• W-2 statements

• Bank statements

• List of schools you're applying to

To apply for the loan as a teenager, you may need your parents' details, including their tax returns.

Step 2: Applying for federal student loans

Most aspiring college students first look to federal student loans for financing since they don't require a credit check or credit history and may offer more favorable terms than a private student loan. Here's how to get student loans through the federal government.

Completing the FAFSA

Your first step is to complete the Free Application for Federal Student Aid (FAFSA), available on the Federal Student Aid website. It's the gateway application to qualify for a federal loan, grant, or work-study program. 

To complete the application, you must create an account. Your parents may need to contribute to your application. The FAFSA deadline is June 30 each academic year, but your school may set another deadline for financial aid applications.

Applying for federal loans

After you submit your FAFSA, the U.S. Department of Education will review your application and provide a Submission Summary. The Submission Summary gives an estimate of expected aid and loan eligibility. Once you receive an admission offer from your selected colleges, you'll receive a financial aid package that includes available federal student loans and other financing options.

Your parent or guardian may apply for additional federal loan assistance on your behalf through a PLUS loan. These loans offer extra funding to pay for education expenses if you qualify.

Step 3: Applying for private student loans

If you need more help paying for college, consider private student loans if they fit into your future budget planning.

Choosing the right private lender

Many banks, credit unions, and online lenders offer private student loans. You can shop with various providers to compare loan interest rates and repayment terms, but you might prioritize lenders that defer repayment until after graduation.

Applying for private loans

Your creditor will explain how to get a loan for student aid purposes. You may need to complete an application and agree to a credit check. The creditor may verify your employment and income if you have a job. If the lender agrees to the loan, you'll receive a contract that includes your borrowing amount, interest rate, and repayment terms.

Finalizing and managing your student loans

Once you get a student loan, you can decide whether to accept it and how to use it to fund your education.

Reviewing and accepting your financial aid offer

When you apply for a federal student loan, your school will send you a financial aid letter outlining the loans available plus any other financial aid options, including grants or work-study programs. You’ll then carefully review your options and decide which (if any) to accept.

Understanding loan disbursement and use

Once the government releases your loans, your school's financial aid office receives the money. It uses the funds to pay tuition, fees, and on-campus living costs. You'll receive the balance of any leftover funds, which you can use for other school expenses, such as books and supplies.

Managing loans while studying: Tips to minimize debt

Taking out a student loan secures funding for education, but it’s not free money. You have to repay it once you leave school. To help your future finances, find ways to minimize costs, like eating at home, buying used textbooks, or part-time work to earn spending money and lessen your daily reliance on a loan.

Explore Greenlight's tools and resources

Greenlight's® banking app¹ helps teens prepare for a savvy financial future. Our tools and resources help you learn how to save and budget college money wisely. Plus, you can earn 1%² cash back and up to 5% on savings.³ Get started today with Greenlight!

FAQs

What is the best type of student loan to get?

Federal student loans offer flexible repayment options and typically don’t require a credit history. They’re usually the best option for young aspiring students since you don't need a job or credit score to qualify.

How long does it take to repay student loans?

It depends on the type of loan. Federal loans come with a standard 10-year repayment plan, but you can choose other repayment plans with longer terms once you leave school. Private student loan payments may last between five and 20 years, depending on the lender.

¹Greenlight is a financial technology company, not a bank. The Greenlight app facilitates banking services through Community Federal Savings Bank (CFSB), Member FDIC.

²Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.

³Greenlight Core families can earn 2% per annum, Greenlight Max families can earn 3% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.