Key Takeaways:
- To take out student loans, complete the FAFSA for federal loans or apply directly with a private lender like College Ave, comparing rates, terms, and cosigner requirements.
- Explore all free aid first—like scholarships, grants, and savings—before turning to student loans to cover remaining college costs.
- Start with federal student loans, which offer fixed interest rates and flexible repayment options, then use private loans to fill any remaining gap.
- Borrow only what you need and understand your repayment terms early to stay financially confident after graduation.
Student loans can be a helpful way for students and their families to cover the cost of college, but they do come with a financial responsibility. That’s why it’s important to understand how student loans work and borrow thoughtfully—only what you truly need.
Since student loans need to be repaid with interest, it’s a good idea to first explore all available funding options that don’t require repayment, like scholarships, grants, savings, or income. Taking the time to plan ahead can help you make confident, informed decisions about how to finance your education.
What You Need to Know Before Taking Out Student Loans
A student loan is a type of financial aid designed to help students and families pay for college or other postsecondary education. These loans cover essential educational expenses such as tuition, books, housing and food, and other school-related costs. Unlike grants or scholarships, student loans must be repaid with interest.
There are two main types of student loans: Federal and Private.
Federal Student Loans
These loans are issued by the U.S. Department of Education and are typically the first option students should explore. Federal loans often have benefits other loans won’t have including:
- Lower fixed interest rates
- Flexible repayment options, including income-driven plans
- Deferment, forbearance, and potential loan forgiveness
Private Student Loans
Private loans are offered by banks, credit unions, and online lenders like College Ave. They can help cover any remaining costs after federal aid is applied. These loans work differently than federal loans and they:
- Typically require a credit check
- May need a cosigner (often a parent or guardian)
- Come with fixed or variable interest rates
While private loans can be a helpful supplement, they usually lack the borrower protections and flexibility offered by federal loans. It’s wise to always exhaust federal loan options first before covering any additional funding needs with a private student loan.
How to Take Out a Federal Student Loan
There are three main kinds of federal student loans – Direct Subsidized, Direct Unsubsidized, and PLUS Loans – and the borrowing process is similar for all of them.
1. Fill Out and Submit the FAFSA
The first step in taking out a loan for college is completing the Free Application for Federal Student Aid (FAFSA). The government uses the FAFSA to determine which aid you’re eligible for including grants, work-study, and loans. States and schools also use the FAFSA to determine financial aid offers.
Most federal, state and school aid is awarded on a first-come, first-serve basis so make sure to complete the FAFSA as soon as it becomes available on October 1st the year before you will enroll. Each school and state have their own deadlines so take note of those important dates.
If taking out a PLUS Loan, there is an additional PLUS loan application that you will file along with FAFSA.
Important Update: Starting July 1, 2026, new federal rules will end Grad PLUS Loans for new borrowers and put new caps on Parent PLUS loans. If you’re currently considering graduate school, keep this deadline in mind as it may affect your borrowing strategy.
2. Review Your FAFSA Submission Summary
After submission, you’ll receive an email notification that your FAFSA was successfully submitted. This summary includes your Student Aid Index (SAI). Review this summary carefully. If you notice any errors, you can make corrections online or contact your school’s financial aid office for help.
3. Understand Your Financial Aid Award Letters
Schools mail or email your financial aid offers, which include federal student loans, around the same time they send their acceptance letters.
Review all of the aid you were offered, including which loans you qualified for and for how much. If you applied to more than one school, compare your offers. They may not be the same for every school.
4. Accept Your Federal Loans
Once you’ve compared your options, it’s time to choose a school and decide which loans you want to accept (or decline). Let your school know before the deadline stated on the award letter.
If you have additional questions about your loan options, reach out to your school’s financial aid office for more help on taking out student loans.
How to Take Out a Private Student Loan
If you still need help financing your college education after securing scholarships, grants and federal loans, private student loans can help cover the difference. These loans are issued by banks or online lenders and require a separate application.
1. Research Private Student Loan Lenders
There are many different private student loan lenders, but they all have their own offers. Look for lenders with low interest rates and flexible repayment terms. Do your due diligence by reading reviews and asking for recommendations. College Ave offers private student loans designed with flexibility and affordability in mind. You can choose from competitive fixed or variable interest rates, multiple repayment plans, and even customize your loan term to match your budget.
To help you shop, use a student loan calculator to estimate costs based on available interest rates. Another way to get an estimate without impacting your credit is to prequalify, which uses a soft pull of your credit report that does not affect your score. Not all lenders offer this benefit.
2. Find a Cosigner
Having a cosigner with good credit can help you qualify for a private student loan and secure a lower interest rate.
Not everyone who takes out a private student loan needs a cosigner, but it can help if you don’t have credit or good credit. Most undergraduates need one because eligibility for private loans is credit-based and younger students usually haven’t had the time to build up qualifying scores.
3. Choose a Private Student Loan Option
After you’ve shopped around, found a cosigner, and estimated costs, it’s time to apply. Remember that you can apply to multiple lenders to see who offers the best rate, but try to apply for private loans within a short period of time.
Each time you apply for a student loan it can count as a hard inquiry on your credit. Multiple hard inquiries in a short time can temporarily lower your credit score. However, if you apply to several lenders within a short window (typically 14-45 days), it’s usually treated as a single inquiry — which is helpful when rate shopping.
To avoid affecting your credit score while comparing rates, look for lenders that offer prequalification with a soft credit check. This lets you see estimated rates and terms without impacting your credit score, so you can make an informed choice before submitting a full application.
Make Student Loans Work for Your Goals
College is one of the most important investments you’ll ever make and when used wisely, student loans can help turn your education goals into reality. The key is to borrow only what you need, understand your repayment options, and plan ahead for life after graduation.
Take time to review your budget, explore flexible repayment plans, and choose a loan that fits your financial future — not just your present needs.
Your college goals are within reach and we’re here to help you achieve them. Start your loan application today and fund your future.
