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I need a student loan. What are my options?
You have two options when you’re looking for a loan to pay for school: Federal loans or private loans.
Federal student loans are funded by the government, which sets interest rates each year and offer flexible repayment plans.
Private student loans are funded by providers like banks, credit unions and online lenders, which charge a range of interest rates based on your creditworthiness.
Typically, both private and federal lenders recommend that students apply for federal loans first, since they often have lower interest rates than federal loans and more forgiving repayment options. However, there is a limit to how much federal funding you can qualify for — and how you can use it.
Federal loans for summer classes
The same federal student loans that are available for courses during the regular academic year can also be used for summer classes. These include:
Direct Subsidized Loans
Direct Unsubsidized Loans
Parent PLUS Loans
Grad PLUS Loans
Private student loans for summer classes
If you’ve reached your federal loan limit or otherwise aren’t eligible, you might want to consider private student loans. Typically, you can borrow up to 100% of your school’s costs, covering whatever federal loans and other financial aid can’t.
Like with federal loans, you can get started by reaching out to your school’s financial aid office. Some might have deadlines for when you can apply for summer funding and other restrictions. Once you’ve confirmed the process with your school, you can start comparing lenders with the table below.
You don’t have to attend a traditional university to take advantage of a student loan, which can also pay for:
A degree abroad. Many universities abroad are part of a deal with the federal government that give US citizens access to federal loans. Learn more about paying for studies in another country.
A second undergraduate degree. You have both federal and private student loans to consider, though you may have fewer options due to lifetime loan limits. Find out what you might qualify for with our guide to student loans for a second degree.
Part-time education. You can qualify for many federal and private student loans if you’re enrolled half time. But you aren’t eligible for federal and some private student loans if you drop below half-time enrollment.
A skills-based program. Some student loan providers like Climb Credit specialize in loans for skills-based programs that don’t qualify for federal aid. However, these may come with higher interest rates and less-flexible repayment plans.
Community college. If your community college is a Title IV school, you may qualify for federal student loans. Otherwise, you can look into private lenders you might qualify with.
Fixed rates from 5.5%
to 5.3%
depending on the loan type
Variable rates as low as 3% or lower, but can reach as high as 18% for fixed rates
Restrictions
Only for education-related expenses while you’re a student
For education and post-graduate expenses, such as studying for a bar exam or starting a medical residency
Repayment options
Deferred until six month after school, full fixed repayments or graduated and income-based options.
Typically deferred or interest-only repayments until six months after school, full fixed repayments over five to 20 years.
Federal student loans generally attract lower interest rates than private student loans, but there’s a limit to how much you borrow and what you can use it for.
They also loans tend to be a first choice because they come with benefits like loan forgiveness programs, flexible repayment schedules, extended terms and multiple repayment options.
Students typically turn to private student loans after they’ve maxed out their federal loans or need help paying for a career-related postgraduate cost like studying for the bar exam or relocating for a medical residency.
In addition to taking out a loan in the student’s name, there’s also the option to take out a loan the parent’s name. You might want to consider a Parent PLUS loan if you’ve exhausted all federal financing options. And if you need private financing, it could be an easier choice since parents with good credit and high income don’t have to bring on a cosigner.
A breakdown of every student loan option
Student loan
What it is
How it works
Where to get it
Undergraduate student loans
Federal and private student loans to pay for an undergraduate degree program.
Federal loans: Fill out the FAFSA and apply for student loans along with other federal funding through your school’s financial aid office.
Private loans: Apply with a cosigner to get up to 100% of your school’s cost of attendance after federal loans and other financial aid.
Federal loans: Your school’s financial aid office.
Private loans: Most private student loan providers.
Graduate student loans
Federal and private student loans to cover the cost of attending a master’s or professional degree program.
Federal loans: Fill out the FAFSA and apply for student loans along with other federal funding through your school’s financial aid office. Subsidized federal loans aren’t available to graduate students.
Private loans: Apply with a cosigner to get up to 100% of your school’s cost of attendance after federal loans and other financial aid. Private student loan rates are typically higher for graduate students.
Federal loans: Your school’s financial aid office.
Private loans: Private student loan providers that offer graduate funding.
Bar exam loans
A loan meant to help recent or soon-to-be law school graduates cover the cost of studying for and taking the bar exam.
Typically borrow between $1,000 and $15,000 from a private lender and start repaying it between six and nine months after receiving your funds.
Private student loan providers that offer bar exam loans.
Medical residency loans
A loan meant to help recent medical school graduates cover the cost of applying to and relocating for a medical residency, plus required exams.
Typically borrow between $1,000 and $15,000 and defer repayments until between six and 36 months after leaving school.
Private student loan providers that offer medical residency loans.
Student loan refinancing
General refinancing: Another loan that you can use to pay off your current student loans at more competitive rates and terms.
Parent loan refinancing: Another loan to transfer a loan in your name to your child’s or get more competitive rates and terms.
Medical resident refinancing: Another student loan with reduced payments during your residency and rates based on your estimated future income.
Take out another loan with new rates, terms and repayment options to pay off your current private or federal student loans.
Private student loan providers that offer refinancing.
Parent loans
Parent PLUS loans: A federal loan in a student’s parent’s name to cover up to 100% of the cost of attendance.
Private parent loans: A loan from a private provider in the student’s parent’s name to cover up to 100% of the cost of attendance.
Parent PLUS loans: Parents fill out the FAFSA and borrow up to 100% of the student’s cost of attendance.
Private parent loans: Parents fill out an application with a private lender to borrow up to 100% of the student’s cost of attendance.
Parents can later refinance the loan into the student’s name.
Parent PLUS loans: The school’s financial aid office.
Private parent loans: A private student loan provider that offers parent loans.
How do I apply for a student loan?
Fill out the Free Application for Federal Student Aid (FAFSA) to apply for a student loan — which also allows you to apply for other types of federal aid like work-study. You can complete this online.
Private student loan providers typically offer online application applications that you can complete along with your cosigner in a few minutes. If you’re applying with a cosigner, they can typically either apply with you or are sent a link to access their part of the application once you’ve completed yours.
It depends on whether you take out a federal or private student loan. Federal loans come with origination fees that range from around 4.5% to 7% of your loan amount. Private lenders don’t usually charge origination or application fees, though it varies. You might also be on the hook for late and NSF fees depending on the type of loan you take out. Learn more with ourguide to student loan fees.
Can I defer undergraduate student loans while in grad school?
In most cases, yes. You can defer your federal student loans by filling out the In-school Deferment Request form and submitting it to your servicer. Contact your servicer to learn what the deferment process is like if you have private student loans. If your private lender doesn’t offer in-school deferment, consider refinancing with a lender that does.
Keep in mind student debt can come with “hidden costs” — like making credit cards, auto loans and mortgages more expensive. Make sure you’ve exhausted your free financing options first before you decide to borrow.
How do I find a competitive student loan?
Federal student loans are the same for everyone, but private student loans aren’t as simple. Find a loan that works best for you by comparing lenders. First make sure you’re eligible, before comparing features like APR, terms and repayment options.
If possible, consider prequalifying with a few lenders once you’ve narrowed it down. That way you’ll get a closer idea of what you’re eligible for than a general range of rates and terms.
What’s a cosigner and do I need one?
A cosigner is another individual who signs your loan documents with you. Cosigners essentially act to reassure the lender that it’ll get its repayments on time.
Many private lenders recommend undergraduate borrowers to apply with a cosigner. But you might want to consider a cosigner even if it isn’t required. That’s because most lenders have minimum credit requirements that most college students can’t meet — usually a minimum credit score of at least 600 and a debt-to-income ratio below 43%.
Can I get a private student loan with bad or no credit?
Generally you can as long as you bring on a cosigner, since most undergraduate students don’t have a credit score yet — some aren’t even old enough to take on credit themselves. Don’t have a creditworthy family member or friend? You still might be able to qualify for student loans through lenders like Sixup, which considers your grades instead if you don’t have a credit score.
Can I get a private student loan without a cosigner?
It’s possible, if you meet your lender’s credit requirements. Generally, you’ll need to have good credit and a specific salary if you go without a cosigner — something most undergraduate students don’t have. Some lenders specialize in student loans without a cosigner, considering your grades and future salary instead of credit and current income.
Curious about what happens after you take out student loans?
Student loans aren’t the only way to pay for college. If you’re not certain you want a student loan, look into these financial aid alternatives.
Grants and scholarships
The federal government, state governments, schools and corporations offer grants and scholarships to students that you typically don’t have to repay.
Grants tend are often based on need, while scholarships are usually merit-based. Outside of need and merit, you can find both scholarships and grants for members of underrepresented groups, members of the US Armed Forces, veterans and specific career paths.
Because it’s rare for grants or scholarships to cover your full tuition, they’re most often used in combination with other financial aid. Popular federal grants include Pell Grants, SMART Grants, the Federal Supplemental Educational Opportunity Grant (SEOG) and the Academic Competitiveness Grant.
Part-time job or side gigs
You likely can’t cover the cost of tuition with most part-time jobs. But you might be able to cover part of your housing, textbooks and pocket money. Bonus points if you find a job in your field to get a head start on your career.
Don’t have time for that kind of commitment? Take on side gigs when you have the time. These gigs might not always cover your entire rent, but they can keep more money in your pocket.
Personal loans
Use a personal loan to pay for college, though you might not want to foot the entire bill with one. Personal loans are typically better for covering extra costs like flying back home for the summer, relocating for an internship and similar expenses that come with being in school.
You can typically borrow between $2,000 and $100,000 with rates that compare to private student loans. However, you often need good credit to qualify, and cosigners aren’t always allowed. Repayments also start immediately.
Income share agreement (ISA)
Schools are starting to offer income share agreements as a student loan alternative. With an ISA, your school agrees to front you a fixed amount of money from a private investment account or college endowment to apply toward your expenses. In turn, you agree to pay a percentage of your post-college income over a fixed time — typically 10% to 20% of your income over a fixed period of time, typically around 10 years.
Retirement accounts
Parents or students can withdraw from their IRA without penalty to pay for qualified higher education expenses (QHEE), which includes tuition, fees and other costs related to attending college. Doing this essentially turns the IRA into a joint college savings fund and a retirement account. However, you might not want to use it to cover all of your education expenses — withdraw too much and you’re required to pay an income tax. Consult a tax expert before you withdraw from your retirement account early.
Some top student loan providers we’ve reviewed
Refinancing student loans
Simply put, student loan refinancing means taking out a new loan to replace your current one. Refinancing can help you save now and in the future by reducing your interest rate, changing how much time you have to repay your loan or reworking the terms of your debt.
Generally, you need good credit and a steady income to qualify for a refinancing loan with low rates. But if you refinance a federal loan with a private lender, you could lose federal benefits that include income-driven repayment plans and loan forgiveness. In most cases, only federal loans offer deferral, which you give up if you refinance your student loan with a private lender.
If you didn’t finish your program, you can refinance a student loan without a degree but with limited options. Compare your needs against your eligibility before signing any contract.
The difference between student loan refinancing and consolidation
Student loan refinancing is when you take out a new loan to pay off one student loan. Student loan consolidation typically refers to a Direct Consolidation Loan, which combines all of your federal student loans into one with a similar APR. Consolidating federal loans allows you to change your servicer and might open you up to more repayment options.
When you refinance your federal loans with a private lender, you give up several benefits that include loan forgiveness for teachers and public servants, deferment programs for healthcare and legal professionals and flexible repayment plans.So while refinancing is possible to do, it’s not always the best idea.
Federal loans also generally come with some of the lowest interest rates out there — rates that are fixed by the federal government. Chances are, you might not be able to find a better deal with refinancing. Talk to your loan servicer to explore your options before turning to refinancing for federal loans.
Refinancing Parent PLUS Loans
Parent PLUS loans don’t come with as many benefits as most other student loans so refinancing might also help you save. You can also refinance a Parent PLUS Loan in your name or your child’s name to help build their credit and release you from their student debt, improving your personal debt-to-income ratio.
How does refinancing a student loan affect my credit score?
Refinancing a student loan can improve your credit in the long run by adjusting your monthly repayments to something you’re more likely to afford. However, it hurts your credit in the short run because most lenders conduct a hard credit inquiry during the application process, which causes your score to temporarily dip.
A cosigner can’t refinance your student loan without your permission. If you’re the cosigner, you can request a cosigner release if you’re unhappy with the way the loan’s terms are affecting your personal finances.
Watch our short video explaining your different repayment options or read more below.
Unlike other types of debt, student loans come with several repayment options. Immediately after you take out your student loans, you might start making full repayments, interest-only repayments or none at all if you’re lucky enough to get a direct subsidized federal loan.
When your funds are disbursed
What happens after you take out your student loan depends on the type of student loan you have.
Federal student loans
Your school receives your student loan money, using it to pay for your tuition and fees. It then gives you the option of taking leftover funds for other education-related expenses or returning them to the government. Here’s what you can expect, depending on your loan type and application:
With a subsidized loan, you don’t have to do anything.
With an unsubsidized loan, you don’t have to do anything while your interest accumulates.
With an unsubsidized loan, you can make interest-only repayments.
With PLUS Loans, you start immediate full repayments on your interest and principal.
Your school pays your tuition from your private student loan funds before forwarding any leftover money to you. You might need to repay your student loans immediately, make interest-only repayments or defer your loan until after you graduate.
After you graduate or drop under half-time studies
Federal student loans
Unless you have a PLUS Loan, you have a six-month grace period before your loan repayments are officially due. Your interest starts to accumulate, if it hasn’t already. At this point, your loan servicer reaches out to set up your account and go over repayment plan options.
You also have the option of consolidating your federal student loans by applying for a Direct Consolidation Loan through the Federal Student Aid site. Consolidating combines all of your federal student loans into one under a new interest rate that’s a weighted average of your previous rates. You begin repaying your student loan 60 days after your consolidation loan is disbursed.
Private student loans
You might find yourself of one of these four scenarios, depending on the loan terms you chose when you signed up. Either you:
Won’t have to start making repayments until six months after you leave school
Start making full repayments right away
Start making interest-only repayments right away
Start making small flat payments right away
Six months after leaving school and beyond
Federal student loans
If you haven’t already begun repaying your loan, you start making repayments to your loan servicer based on your repayment plan. Setting up autopay at any time could knock 0.25% off your interest rate.
Private student loans
You either start making repayments after a grace period or continue making repayments. Ask about discounts for autopay — some lenders are willing to discount your rate by 0.5% if you sign up.
What’s a loan servicer?
Loan servicers are companies that lenders hire to manage your loan repayments in exchange for a portion of the profits. The federal government uses loan servicers for all of its loans, but some private lenders use servicers as well.
You don’t get to choose your servicer, and they won’t always reach out after your loans are due. If you’re not sure who your loan servicer is, find it through the National Student Loan Data System.
Student loan repayment plans
When you start making repayments, you might have a choice between several different repayment plans. These can include monthly repayments that stay the same throughout the life of your loan, or repayments that better fit an earning curve as you start your career.
Generally, federal loans come with more flexible options, including several based on your income. Private student loans typically come with fixed repayments over five to 20 years regardless of how much you earn.
Other repayment options
Life happens. You might that you’re unable to make repayments on your loan, even if you’re on an income-based plan. Or maybe you want to let your cosigner off the hook to lower their overall debt load.
Some of the options you might come across for repayments include:
Forbearance. If you lose your income, are part of a military deployment or simply want to return to school, you might be able to pause your student loan repayments. How long and often you can go into forbearance depends on your loan and lender, but expect interest to continue adding up.
Deferment. Like forbearance, you can apply to pause your repayments for a legitimate reason. The difference is that your interest doesn’t accumulate while you’re in deferment.
Cosigner release. You can release your cosigner from most student loans after consistent on-time repayments for a specific time — usually a few years. After your cosigner is released, you’ll be fully responsible for your debt.
Forgiveness. Depending on your loan type or career, you might be eligible to have some or part of your loans canceled — especially if your have federal loans.
Understanding interest capitalization
Both federal and private student loans can include interest capitalization, adding accrued interest to your loan balance. The most common time for interest capitalization is with a change in your repayments — at the start of repayments deferral or forbearance. Some private lenders also capitalize interest annually or quarterly.
Firsthand experiences of finder team members
Anna chooses a repayment plan for her federal loans
Anna was lucky: She got a free ride for college and graduated without any student debt. But when it came to graduate school, she didn’t have nearly as many financing options. By the time she completed her MA, she’d accumulated more than $39,000 in federal unsubsidized student loans.
Anna found income-based repayment plans too complicated, so she signed up for the extended graduated repayment plan offered by her servicer, Great Lakes. Repayments started at an affordable $208 per month for the first two years. And by the time her payments increased, she’d already landed a higher paying job.
Andy negotiates a better deal on private student loans
Andy graduated from college with $62,000 in private student loans from Sallie Mae. But after his grace period was up, he wasn’t making enough money to afford that kind of repayment.
He deferred it for another six months, but by the time his second grace period was over and he still couldn’t afford repayments. Sallie Mae began frequently calling him and his parents — his cosigners — to demand repayments.
Andy explained his situation and convinced Sallie Mae to switch him to an income-based repayment plan. It reduced his monthly repayments to $301 until 2019, when Sallie Mae will reassess his income.
How do I transfer my student loans between schools?
Federal student loans don’t transfer between schools, and most private student loans don’t either. Instead, you’ll need to take out a new student loan to use for the school you’re transferring to. You can find out how to do this with our guide to student loans for transfer students.
Is going to college worth taking out thousands of dollars in student loans?
It depends on your career and financial goals. However, most Americans believe college is worth the high costs since it opens you up to more job opportunities and increases your marketability and earning potential. Explore more benefits of getting a college degree to help you decide if it’s right for you.
Anna Serio is a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY.
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Curious about what happens after you take out student loans?
Anna