How to apply for student loans: Federal vs. private

Though many parents and prospective students are balking at the continued rise in the cost of college, it’s still true that going to college puts you in a better financial position than not going.In the 2024-2025 school year federal aid, including grants, loans and work-study, amounted to $275.1 billion.That’s $16,810 on average for undergraduates and $29,160 for graduate students.Students who need to borrow money have two options: Federal student loans or private loans.

Both have their advantages and disadvantages.Federal student loans are funded by the Department of Education and come with substantial safeguards and protections.Most types of federal loans don’t require a credit check, and interest rates are fixed, which means the payments are the same each month and amortized over a set period.That makes them a great resource for students who haven’t had time to develop a credit history.Variable-rate direct subsidized and unsubsidized loans, as well as direct PLUS loans, which are for parents borrowing for their children, have a variable interest rate that is set by statute and based on the interest rate of the 10-year Treasury bill.

This rate is usually lower than the rate borrowers can find in the private market.As of July 1, 2026, federal loans also offer two repayment plans for new borrowers and a legacy income-based repayment plan for older eligible loans.The two new plans are the Tiered Standard Plan and the Repayment Assistance Plan, which were passed into law in 2025.While federal loans have many benefits, the application process can be quite long.

Here’s what to expect.The Free Application for Federal Student Aid (FAFSA) is a crucial first step in applying for federal student loans.This form collects personal and financial information about you and your family if you’re a dependent student.

Schools then use this data to determine the federal aid you qualify for.The Department of Ed’s digital version of the FAFSA  allows you to fill out ...