Understanding Your Loan Options
Student loans can help cover educational expenses that are not fully met by grants, scholarships, work-study, savings, or other resources. Because loans must be repaid with interest, it is important to understand the different borrowing options available and borrow responsibly.
Types of Student Loans
Student loans generally fall into two categories - federal and private loans - each with unique application processes, interest rates, and repayment options.
Federal Student Loans
Federal student loans are funded by the U.S. Department of Education and may offer long-term, low-interest financing to eligible students. Students must complete the Free Application for Federal Student Aid (FAFSA) to be considered for federal student loans.
Learn More About Federal Student Loans
Private/Alternative Loans
Private or alternative loans are offered by banks, credit unions, and other private lenders. Eligibility and loan terms vary by lender and may depend on credit history or a creditworthy cosigner. Private/Alternative Loans can be a useful funding option when needed, but these loans should only be considered after other financial aid options have been explored.
Learn More About Private/Alternative Loans
Federal vs. Private Loans
| Feature | Federal Loans | Private Loans |
| Application | FAFSA | Lender application |
| Credit Check | Usually not required for student borrowers. May be required for parent borrowers. | Often required |
| Interest Rates | Set by federal law | Vary by lender |
| Repayment Options | Federal repayment plans available | Vary by lender |
Borrow Responsibly
It is important to remember that loans must be repaid with interest. Before borrowing, students should consider grants, scholarships, employment savings and other resources. Borrow only what is needed for educational expenses and understand the repayment obligations associated with any loan.
To learn about budgeting, managing loans, and preparing for life after graduation, visit our Student Financial Success resources.
Frequently Asked Questions
What is the difference between federal and private student loans?
Federal student loans are funded by the U.S. Department of Education and typically offer fixed interest rates and flexible repayment options. Private student loans are offered by lenders and may vary in terms, interest rates, and eligibility requirements.
Do I have to complete the FAFSA to receive student loans?
You must complete the FAFSA to be considered for federal student loans. Private student loans are not awarded through the FAFSA and require a separate application with a lender.
Do student loans have to be repaid?
Yes. All student loans must be repaid with interest, even if you do not complete your program.
What is interest?
Interest is the cost of borrowing money. When you take out a student loan, interest is the additional amount you pay back on top of the original loan amount (principal). Federal student loans have fixed interest rates set by the U.S. Department of Education, while private student loan interest rates vary by lender and borrower eligibility.
How much should I borrow?
You should only borrow what is needed to cover essential educational expenses after other financial aid such as grants, scholarships, and work-study has been applied.
Are credit checks required for federal student loans?
Most federal student loans do not require a credit check on the student borrower, but private student loans often do.