Student loans help a lot of people pay for college when cash is tight. They come in different flavors—federal loans backed by the government and private loans from banks or other lenders.
Getting the basics of student loans—how they work and what’s out there—can make paying for school a bit less overwhelming.
To get a student loan, you’ll need to apply, meet certain requirements, and pick the right loan type. After you borrow, managing repayment matters if you want to avoid late fees or extra charges.
There are ways to lower your payments or even get some debt forgiven under specific rules.
Key Takeways
- Student loans come in federal and private types with different terms.
- Repayment options and protections help manage loan debt.
- Choosing and handling loans wisely reduces financial stress.
Understanding Student Loans
Student loans help cover college costs like tuition, housing, and books. Every loan has its own rules about borrowing, interest, and repayment—stuff you’ll want to know before signing anything.
What Are Student Loans?
Student loans are borrowed money meant to pay for college or career school expenses. Unlike grants or scholarships, you’ll have to pay them back (with interest, of course).
There are two main types: federal student loans and private loans from banks or credit unions. Federal loans usually have lower interest rates and more flexible repayment options.
Private loans depend on your credit and might cost more. Only borrow what you really need—loans create debt that sticks around until it’s paid off.
How Student Loans Work
When you take out a loan, you get money for school costs. Interest starts building either right away or after a grace period, depending on your loan.
You’ll pay the loan back over time in monthly chunks. Federal loans include Direct Subsidized (the government covers interest while you’re in school) and Direct Unsubsidized (interest builds up from day one).
PLUS loans let parents or grad students borrow more if needed. Repayment plans can change based on your income or how long you want to pay.
It’s important to know your interest rate and repayment schedule—seriously, it can save you headaches later. For more, check out Loans | Federal Student Aid.
Types of Student Loans
Student loans come in different forms, each with its own rules on interest, eligibility, and repayment. Knowing the differences helps you pick what fits your needs best.
Federal Student Loans
The U.S. government funds federal student loans, so they come with fixed rates and some built-in protections. The main types are Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
If you have financial need, Direct Subsidized Loans are for you—the government pays the interest while you’re in school. Direct Unsubsidized Loans don’t care about financial need, but interest starts building right away.
Both have yearly borrowing limits. Direct PLUS Loans are for parents or grad students who need to borrow more, but they come with higher rates and a credit check.
Federal loans offer flexible repayment and sometimes even forgiveness. For more, see Federal Student Aid Loan Types.
Private Student Loans
Banks, credit unions, and other lenders offer private student loans. You’ll usually need a credit check and maybe a co-signer.
Rates and terms vary a lot by lender—some are fixed, some are variable. Private loans don’t have as many protections as federal ones and are mostly for when you’ve hit your federal loan limit.
Lenders might offer special perks, but it’s smart to compare. Your credit and income decide what you’ll get.
Private loans are less regulated, so repayment plans are often less flexible and forgiveness is rare. Knowing these differences helps you make better choices. For a deeper dive, see Forbes on Student Loan Types.
Federal Student Aid Programs
Federal student aid programs help students pay for college with different types of financial support. There are loans, grants, scholarships, and work-study jobs.
Each one targets different needs and eligibility, so it’s worth learning how to access them.
FAFSA
The Free Application for Federal Student Aid (FAFSA) is your ticket to most federal aid. Students fill it out yearly to share their financial info and see what they qualify for—grants, loans, or work-study.
FAFSA looks at income, family size, and school costs to figure out your Expected Family Contribution. Deadlines vary, so applying early is smart if you want the best shot at aid. It’s free and online at studentaid.gov.
Grants and Scholarships
Grants are federal money you don’t pay back. The Pell Grant is the big one for undergrads with financial need.
How much you get depends on your family contribution, enrollment status, and school costs. Scholarships are usually based on merit—grades, sports, or other stuff—and don’t need repayment either.
Both grants and scholarships mean less money you have to borrow.
| Aid Type | Repayment Required | Basis | Examples |
|---|---|---|---|
| Grants | No | Financial need | Pell Grant |
| Scholarships | No | Merit or criteria | Academic, sports |
Work-Study Programs
Work-study gives students part-time jobs if they have financial need. These gigs help cover school expenses while you’re taking classes.
Most jobs are on campus, but some are off-campus with approved employers. The hours are usually flexible, so you can actually get to class. FAFSA decides if you’re eligible. More info is at the official Federal Student Aid site.
Eligibility and Financial Need
Student loans are often based on your financial situation. Knowing how financial need is figured out and what rules apply helps you see what aid you might get.
Determining Financial Need
Financial need is the gap between your total college cost and what you and your family are expected to pay. FAFSA crunches the numbers for your expected family contribution.
Total attendance cost includes tuition, fees, room and board, books, and supplies. Financial need decides if you can get need-based loans or grants.
For example, federal subsidized loans go to students who show financial need. Unsubsidized loans don’t care about need. The more need you have, the better your shot at subsidized aid.
Eligibility Criteria for Loans
To get federal student loans, you need to meet a few rules. You must be a U.S. citizen or eligible non-citizen, enrolled at least half-time in an approved program, and keep your grades up.
There are yearly borrowing limits based on your year in school and dependency status. First-year undergrads can borrow up to $5,500 in federal loans, with caps on subsidized amounts.
You also can’t be in default on any previous federal loans, and you’ll need to finish entrance counseling so you know what you’re getting into. Meeting these requirements is a must if you want federal loans.
For more on eligibility, check Federal Student Aid eligibility and Federal Subsidized and Unsubsidized Loans.
Interest Rates and Loan Terms
Student loans have their own interest rates and terms, which affect how much you’ll pay back. Some loans help with interest while you’re in school, but others start charging right away.
It’s worth knowing what you’re signing up for.
How Interest Rates Are Set
The government sets federal student loan rates each year, and they’re fixed. For undergrads, the 2025-26 rate is 6.39%—that won’t change for the life of the loan.
They base these rates on the 10-year Treasury note plus a set margin. This means rates shift each year for new loans, but yours stays put once you borrow.
Private loans are a different story—they often have variable rates that depend on your credit score and the market. Lower rates mean less interest piling up, so it’s something to pay attention to.
Subsidized vs. Unsubsidized Loan Terms
Subsidized loans are federal loans where the government pays the interest while you’re in school at least half-time. This also applies during your grace period and deferment.
Your loan balance doesn’t grow during these times, which helps cut down the overall cost. That’s a real advantage if you’re worried about ballooning debt.
Unsubsidized loans, on the other hand, start racking up interest as soon as the loan is disbursed—even while you’re still in school. You can pay this interest during school or let it add to the principal, but if you wait, you’ll end up owing more later.
Key differences:
- Subsidized loans save money on interest while you’re in school.
- Unsubsidized loans may lead to higher balances if you don’t pay interest promptly.
Both types usually have similar repayment terms. Managing interest while in school can make a noticeable difference in what you owe long-term.
Check out more about federal loan interest rates on Federal Student Aid.
Applying for Student Loans
Applying for student loans has a few key steps. You want to get the right aid and know your repayment options before signing on.
It’s important to complete official forms accurately. Picking a reliable loan servicer also makes managing your loans a lot less stressful.
Filling Out the FAFSA
The Free Application for Federal Student Aid (FAFSA) is your starting point for federal student loans. It collects financial information to figure out what aid you can get.
Filling out the FAFSA early—usually right after it opens on October 1—gives you the best shot at aid. The form asks for your income, tax returns, and household details.
Schools use your FAFSA data to put together a financial aid offer, which might include both subsidized and unsubsidized loans. Double-check your entries to avoid mistakes that could slow things down.
Submitting the FAFSA doesn’t guarantee a loan, but you need it for federal aid and lots of other programs. If something changes, you can update or correct your info.
Required Documentation
When you apply for loans, you’ll need certain documents handy. Usually, that’s your Social Security number, federal tax returns, proof of income, and info on any current financial aid.
Some schools or lenders might want extra paperwork like residence verification or proof of citizenship. Having everything ready makes the process smoother.
You’ll also sign agreements that spell out your loan terms and responsibilities. Take a moment to read these closely so you know about interest rates, repayment schedules, and deferment options.
Selecting a Loan Servicer
Your loan servicer is the company that manages your loan repayment after funds are disbursed. Picking a good servicer can make a big difference in staying on top of your loans.
Federal student loans get assigned to servicers approved by the Department of Education. You can reach out to your servicer for statements, payment help, or assistance programs.
It’s smart to keep your servicer’s contact info and online login details somewhere safe. Checking your account regularly helps you avoid missed payments and late fees.
Some private loans let you pick a lender that offers different servicer options. If that’s the case, look at reviews and customer support before deciding.
Want more info? The official Federal Student Aid site has plenty of details about the FAFSA and federal student loans.
Student Loan Repayment
Repaying student loans means finding a plan that fits your financial situation. You can adjust your payments by picking different repayment options or monthly amounts.
Repayment Plans
Repayment plans set your timeline and monthly payment. Standard, Graduated, and Income-Driven Repayment (IDR) are the main types.
The Standard Plan gives you fixed payments over 10 years. Graduated plans start low and bump up every two years.
IDR plans base your payments on your income and family size, which can help if you’re earning less. Some folks working in government or nonprofits might qualify for Public Service Loan Forgiveness after 10 years of payments.
Picking the right plan can help you avoid default and keep payments manageable.
Monthly Payment Options
Your monthly payment depends on your plan and loan balance. Fixed payments stay the same, making it easier to budget.
Graduated plans let your payments rise slowly. IDR plans set payments as a percentage of your discretionary income, so your bill could be lower if your income drops.
Missed or late payments can lead to default, extra fees, and credit damage. Some servicers offer deferment or forbearance to pause payments if you’re struggling.
If you need to change your payment terms, contact your loan servicer—like Edfinancial Services—for help.
Deferment and Forbearance
If you hit a rough patch financially, you can pause or reduce loan payments with deferment or forbearance. They’re both helpful, but they work differently, especially when it comes to interest.
What Is Deferment?
Deferment lets you stop making payments on federal student loans for a while. During deferment, interest doesn’t pile up on certain loans, like subsidized Direct Loans.
The government covers the interest in those cases, so your balance doesn’t grow. To qualify, you usually need to meet specific conditions.
Common reasons for deferment are being in school at least half-time, unemployment, economic hardship, or active military service. Deferment often beats forbearance since it can keep your interest from growing.
Temporary Financial Relief
Forbearance is another way to pause or lower your payments, but interest keeps adding up on all federal loans during this time. You’ll need to pay that interest eventually, or it’ll get tacked onto your loan balance.
Forbearance helps if you don’t qualify for deferment but still need relief—maybe due to illness or other challenges. Just be aware your total cost will go up if you let interest accrue.
Want to dig deeper? Check out the Edfinancial Services deferment and forbearance page for more info.
Student Loan Forgiveness
Student loan forgiveness can clear or reduce your debt if you meet certain conditions. There are several programs, each with its own rules about eligibility, payments, and which loans qualify.
Loan Forgiveness Programs
Some forgiveness programs offer debt relief if you work in specific fields or make a set number of payments. Teachers, nurses, and military service members often have options.
Common federal programs include:
- Teacher Loan Forgiveness: Up to $17,500 forgiven after five years in a low-income school.
- Income-Driven Repayment Forgiveness: Remaining debt wiped out after 20-25 years of qualifying payments.
- Perkins Loan Cancellation: Up to 100% canceled for certain public service jobs.
Most programs require federal loans and steady, qualifying payments. You’ll need to apply and keep in touch with your loan servicer to stay on track.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) wipes out your Direct Loan balance after 120 qualifying monthly payments. You need to be on a qualifying repayment plan and work full-time in a public service job.
Eligible jobs include government, nonprofits, and some public health or education roles. Only Direct Loans count—other federal loans have to be consolidated first.
To get PSLF, you must:
- Make 120 on-time payments.
- Work full-time for a qualifying employer.
- Submit the PSLF Employment Certification Form every year and before applying.
PSLF takes detailed documentation and close loan management, but it can offer huge relief for those in public service roles. You can find more details and updates on Public Service Loan Forgiveness resources.
Consolidation and Refinancing
Combining student loans can make payments easier to manage. You’ve got federal options to merge loans into one, and private refinancing with different lenders.
Each choice affects your interest rate, repayment schedule, and eligibility for federal benefits. It’s worth thinking through what matters most for your situation.
Direct Consolidation Loans
With a direct consolidation loan, you can roll multiple federal loans into one through the government. The new loan gets a fixed interest rate that’s the weighted average of your old loans, rounded up a bit.
You end up with just one monthly payment and can pick from extended or income-driven plans. Once you consolidate, you can’t undo it, so choose carefully.
You don’t have to consolidate all your federal loans at once—pick and choose if you want. Just know that consolidating might reset progress toward some forgiveness programs tied to income-driven repayment.
More about direct consolidation loans is available at 5 things to know before consolidating federal student loans.
Benefits and Drawbacks
Consolidation makes it simpler by turning multiple payments into one. You might get access to new repayment plans that lower your monthly bill.
It can also restore eligibility for federal benefits if you’ve defaulted. But, consolidation can stretch out your loan period, meaning you might pay more interest in the long run.
The interest rate usually won’t drop since it’s just an average, not based on your credit. If you’re working toward forgiveness, be careful—consolidation can reset your progress. For a clearer look at pros and cons, check out guides on how to consolidate student loans.
Recent Changes and Future Trends
Student loan repayment rules are changing, and that’s shifting how much folks pay each month and how long repayment lasts. New plans aim to make payments more manageable by tying them to income.
Some programs are trying to shrink the amount borrowers repay by adjusting payment percentages. It’s a lot to keep up with, honestly.
New Repayment Plans
Congress is working on new rules that will shake up federal student loan repayment starting July 1, 2026. These changes include stricter borrowing limits and ending some loans, like Parent PLUS Loans.
The new rules also plan to phase out unemployment and economic hardship deferments for future borrowers. That’s a big shift for students counting on those options.
A major focus is on income-driven repayment plans. These plans set monthly payments based on your income and family size.
New limits could lower the percentage of income used for payments, making things a bit easier for some. But, eligibility for Public Service Loan Forgiveness (PSLF) will change for new borrowers, limiting some forgiveness options.
These changes push borrowers to be more cautious about how much they borrow and how they repay. If you want more details, take a look at the report on Congress moves forward changes to student loans.
Saving on a Valuable Education (SAVE)
The Saving on a Valuable Education (SAVE) plan updates income-driven repayment in a way that’s honestly overdue. It lowers the chunk of discretionary income borrowers have to pay. Compared to older plans, SAVE protects more of your income from being counted, so monthly payments usually drop.
SAVE can also forgive any remaining loan balance faster, sometimes after just 10 or 20 years of payments. It opens up eligibility for more people and tweaks how interest works, so your balance doesn’t balloon when your payments are low.
If you want to dig deeper, there are some good breakdowns and debates about SAVE and what it means for borrowers over at new trends in student loans.
Frequently Asked Questions
Student loan forgiveness isn’t automatic; you have to apply and meet certain requirements. Managing loans online means using secure login portals, which can be a hassle but gets easier with time.
Federal and private loans really aren’t the same—terms, interest, and protections all differ. Repayment plans come in a bunch of flavors, so you can usually find something that fits your budget. If you get stuck, reaching out to your loan servicer directly is probably your best bet. Interest rates? They depend on your loan type and whatever the current federal guidelines are.
What are the steps to apply for student loan forgiveness programs?
Start by checking if you’re eligible based on your loan type and job. Most people fill out an application on their loan servicer’s website.
You’ll probably need to upload things like proof of employment or income. Make sure you read the instructions and keep an eye on the deadlines—missing one can mess things up.
How do I log in to manage my student loans online?
Head over to your loan servicer’s website and create an account if you haven’t already. Logging in usually needs a username, password, and sometimes two-factor authentication.
Once you’re in, you can check your balances, see payment history, and update your contact info. It’s not always the smoothest experience, but it works.
What are the differences between federal and private student loans?
Federal loans come from the government, usually with fixed interest rates and more borrower protections. Private loans are from banks or other lenders and often have variable rates, plus fewer options if you need to pause payments or get forgiveness.
If you want flexibility, federal loans tend to give you more repayment options. Private loans? They’re stricter, and you’re more on your own.
What options are available for student loan repayment?
You can pick from standard, graduated, income-driven, or extended repayment plans. Each one changes your monthly payment and how long you’ll be paying.
Income-driven plans base payments on your earnings, which can make monthly bills a lot less scary. It’s worth comparing before you commit.
How can I contact MOHELA for questions about my student loans?
MOHELA has customer service by phone, email, and online chat. You can also log in to your MOHELA account and send secure messages.
They list all their contact info on the official MOHELA website, so you shouldn’t have trouble finding it if you need help.
What are the current interest rates for student loans?
Interest rates change depending on the type of loan and when you get the funds. The government sets federal student loan rates every year.
Private lenders offer their own rates, which usually depend on your credit history and sometimes other factors. If you want the latest federal rates, the best place to check is an official government website.
For more detailed answers, see the Federal Student Aid Help Center.
