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What You Need to Know About Student Loans

When you’re a college student, you may not know every detail about student loans. In fact, you may not know about them at all — just that you need them in order to pay for college. You may even really realize how much debt you’ve racked up until you graduate.

In quarter two of 2021, theFederal Reserve said that Americans owed $1.73 trillion in student loans. This is an increase of 3% compared to quarter two of 2020, even despite a pause in paying on student loans engineered by the Biden Administration.

Let’s go over the basics of student loans, how to get them, how to repay them, and finally, how to refinance them if needed. We’ll help you whether you’re a parent looking into them for a prospective college student, whether you’re a college student yourself or whether you need to know how to pay back your student loans yourself. Let’s take a look.

Basics of Student Loans

Let’s go over the basics of federal and private student loans and get a few quick definitions of each.

Federal Student Loans

You get student loans from the federal government, or to be specific, the U.S. Department of Education. The U.S. Department of Education offers three types of federal loans created specifically for college-bound students:

  • Direct Unsubsidized Loans: Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans) offer a low, fixed interest rate and flexible repayment terms to undergraduate, graduate and professional students. In contrast to the Direct Subsidized Loan, the government does not pay the interest while you’re in school.
  • Direct Subsidized Loans: Direct Subsidized Loans (sometimes called Subsidized Stafford Loans) are loans for eligible undergraduate students to help cover the costs of college or career school. Unlike the Direct Unsubsidized Loan, the government pays the interest while the student is in school.
  • Direct PLUS Loans: Direct PLUS Loans include Grad PLUS loans for graduate and professional students andParent PLUS loans for parents of undergraduate students.

Federal student loans offer more flexibility than private student loans for several reasons. You don’t have to undergo a credit check to get a federal student loan, with the exception of the Direct PLUS Loan, which does require a credit check.

Forgiveness and income-driven repayment plans are available for federal student loans. In addition, federal student loan interest rates are lower compared to private loans.

Private Student Loans

What are private student loans? You don’t get these loans from the federal government — you can get them from a local bank, credit union or other private student loan lender.

Private student loans can fill in the need gap after federal student loans. In fact, it’s a good idea to fulfill paying for college in this order:

  • Scholarships
  • Grants
  • Parent/student savings
  • Federal student loans

Finally, many experts recommend using private loans as a last resort.

Private loans often require a cosigner — usually a parent or another relative. Students can qualify for a private loan without a cosigner, though that’s difficult to achieve. No matter who applies for the loan, that person will need a good credit score and show proof of income. Before you take action on this type of loan, remember that cosigners are also just as responsible for paying back loans.

How to Get a Student Loan

How do you get a federal student loan? One of the most important things you must do involves filing theFree Application for Federal Student Aid (FAFSA) form. The colleges and universities that the student is interested in will take the results of the FAFSA and put together a financial aid offer, which may also include federal student loans.

The college or university will require you to completeentrance counseling, which ensures that you understand your responsibility to repay the loan. You must also sign aMaster Promissory Note, which means that you agree to the terms of the loan.

Your college or university may have an approved lender list for private student loans, but you can also do your own research to determine the right lender for you. You may choose among banks, credit unions and online companies. Instead of filing the FAFSA, you apply with the financial institution directly.


This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, UNest does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.