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Applying for a student loan generally works one of two ways. Students interested in borrowing a federal student loan can apply by filling out and submitting the Free Application for Federal Student Aid (FAFSA®) each year.

Private student loans run independently of the federal loan program. Students are able to apply for a private student loan at any time during the school year.

Keep reading to learn more on how to get both federal and private student loans, plus other ways to pay for college.

Understanding The Difference Between Private and Federal Student Loans

There are a few important differences between federal and private student loans.

Federal Student Loans

For federal student loans, the U.S. Department of Education runs the William D. Ford Federal Direct Loan Program. The program has four types of loans to consider:

•   Direct Subsidized Loans: Direct Subsidized Loans are for undergraduate students with financial need, where the government pays the interest while the student is in school at least half-time, during the grace period, and during deferment.

•   Direct Unsubsidized Loans: Direct Unsubsidized Loans are available to undergraduate and graduate students regardless of financial need, and interest begins accruing as soon as the loan is disbursed.

•   Direct PLUS Loans: Direct PLUS Loans are available to graduate or professional students and parents of dependent undergraduates to help pay for education expenses not covered by other financial aid, and they require a credit check.

•   Direct Consolidation Loans: Direct Consolidation Loans allow borrowers to combine multiple federal student loans into a single loan with one monthly payment and a fixed interest rate.

Private Student Loans

Private student loans are offered through private lenders. As a part of the application process, lenders will generally evaluate a borrower’s personal financial information and history, including their credit score, among other factors.

Private loans don’t have to follow the same government regulations as federal loans, and they don’t offer the same borrower benefits or protections — like income-driven repayment plans or Public Service Loan Forgiveness. For this reason, private loans are generally considered an option only after other sources of funding have been exhausted.


💡 Quick Tip: SoFi offers low fixed- or variable-interest rates. So you can get a private student loan that fits your budget.

How to Apply for a Federal Student Loan

The first step in applying for a federal student loan is to complete and submit the Free Application for Federal Student Aid (FAFSA®). The FAFSA is typically available starting in the fall of the year before school starts and will remain open until June 30th of the academic year. So for example, for the 2025-2026 school year, the FAFSA application opened on November 21, 2024, and will close on June 30, 2026.

While there is a large window to fill out the FAFSA, there may be college or state deadlines that fall before the federal deadline. Additionally, some aid is awarded on a first-come, first-served basis, so it can be beneficial to fill out the FAFSA as early as possible.

Once the FAFSA is submitted, your school will review and determine your financial aid offer, which may include federal student loans, scholarships, grants, and work-study.

Before you receive any federal student loan that you apply for, you’ll be required to complete entrance counseling, which is designed to help you understand your obligation to repay the loan. You’ll also be asked to sign a Master Promissory Note, which says you officially agree to the terms of the loan.

How To Apply For Private Student Loans

You may want to consider a private student loan after you’ve explored your options for federal financial aid. Private lenders typically have their own qualification criteria, but you may be eligible to apply for a private student loan if you’re an undergraduate or graduate student, pursuing a certificate, a student of the dental, medical, or other health professions, studying to take the bar exam, or relocating for medical or dental residencies.

Parents may also be eligible to take out private loans to pay for their child’s education.

Private student loans can usually be used for any type of expenses related to your education, including tuition, room and board, fees, books, supplies, equipment, computers and electronics related to your schoolwork, transportation, and personal needs at school.

To apply for a student loan, you may need to provide:

•   Your name, address, phone number, and email address

•   Date of birth

•   Social Security number

•   Employer’s name

•   Proof of income (a recent pay stub)

•   Bank account balances

•   Monthly housing payment (rent/mortgage)

•   School name

•   Estimated cost of attendance

•   Your current student status (freshman, full time, for example)

•   Other financial aid you’ve received so far

•   Anticipated graduation date

•   References

•   Student loan cosigner and cosigner’s information, if applicable

Private student loan lenders may let you submit your loan application online, and some may even be able to give you an answer the same day. Of course, underwriting timeframes and documentation requirements can vary greatly by lender.

What Is Private Student Loan Approval Based On?

Private student loan approval is based on your income, credit history, and credit score, among other factors. That means the lender looks at your history of borrowing money and paying it back, which also determines your loan’s interest rate.

If your credit history is unestablished or less than stellar, applicants may consider adding a cosigner to the loan. A cosigner will be responsible for paying it if you are unable to do so.

Beyond Student Loans: Other Ways to Pay for College

Students can explore other options to pay for college, including scholarships, work-study, grants, and more.

Scholarships and Grants

Scholarships and grants are types of aid that don’t need to be repaid. Grants are generally awarded based on financial need and may be awarded by your school, the government, or another organization such as a nonprofit.

Scholarships are awarded based on various criteria such as academic achievement, athletic ability, artistic talent, financial need, or community service. Scholarships can come from schools, private organizations, nonprofits, or government programs, and applying early can increase a student’s chances of receiving aid.

Recommended: SoFi’s Scholarship Search

Work-Study

The Federal Work-Study Program offers part-time employment to undergraduate students who demonstrate financial need. Eligibility for work-study is determined by the FAFSA. Some schools may match students to a work-study job, while other schools may require that students apply for positions.

Part-Time Job

Working part-time can be another way to earn extra cash to pay for college expenses. Students could look into jobs such as tutoring, babysitting, or working at a local business in their college town.

The Takeaway

To get a federal student loan, students fill out the FAFSA in order to see which type and how much aid they may be eligible for. The application process for private student loans may vary by lender. Private student loans can help students pay for college if they don’t get enough federal aid.

Students can also explore other options to help pay for college, such as scholarships and grants, work-study, or another part-time job.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is the first step in applying for a federal student loan?

The first step is to complete and submit the Free Application for Federal Student Aid (FAFSA), which determines your eligibility for federal student loans and other financial aid.

What types of federal student loans are available?

Federal student loan options include Direct Subsidized Loans for students with financial need, Direct Unsubsidized Loans available regardless of financial need, and Direct PLUS Loans for graduate students or parents of undergraduates, which require a credit check.

What should students consider when choosing a student loan?

Students should evaluate factors such as interest rates, repayment terms, eligibility requirements, and the total cost over time to determine the loan option that best fits their financial situation.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-023

As the cost of college continues to rise, many students turn to private student loans to help cover expenses not met by federal aid. However, securing these loans can be challenging without a strong credit history or steady income. That’s where parents often come in — as cosigners.

While cosigning can help a student access the funding they need, it also comes with serious financial responsibilities. Keep reading to learn the key considerations parents should weigh before agreeing to cosign a student loan.

Why Are Student Loans Cosigned So Often?

It’s no secret that the cost of college education has skyrocketed. Consider these statistics:

•   The average cost of college has doubled since the year 2000.

•   The current average cost for one year of college at a public institution is $38,270, including living expenses. Average tuition and fees at four-year in-state colleges is $9,750; for out-of-state students, it’s $28,386 per year.

•   For a private, nonprofit university, that number rises to $56,628 on average, with tuition and fees accounting for $38,421 of that sum.

There are many kinds of funding and different types of student loans to contemplate when budgeting for college. When savings, federal student loans, federal work-study, and scholarships or grants can’t fill the gap, students may look to private lenders to help them cover the rest.

Unfortunately, students just starting out usually don’t have the credit history needed to get a loan from a private lender, so cosigners sometimes step in.

But do students have to have a cosigner for a private student loan? Almost always. Since many lenders won’t lend money to young adults with no or little credit history, they typically require cosigners. Roughly 90% of all private undergraduate student loans have a cosigner.

Recommended: A Complete Guide to Private Student Loans

What Are the Downsides to Cosigning My Child’s Loan?

If you’re looking to privately fund your child’s education costs, it means you likely need the help to pay for college, just like many Americans do. But cosigning for your child’s private student loan is not without potential repercussions. Think over the following:

•   When wondering if you should cosign a student loan, consider your relationship with your child. If something goes wrong — missed payments, extended unemployment, or worse, default — the potential for financial stress could create the possibility of misunderstandings and hurt feelings. If your relationship with your child is already tenuous, bringing financial stress into it will likely not help.

•   Cosigning could put your own finances at risk. You may have the most responsible young adult in the whole state, but if something goes awry and the loan goes into default, the lender may sue you or hire a collection agency to try to recoup the debt.

A student loan default might also tarnish your credit score. Simply signing the loan also affects your score. Even if you’re not the one making payments, you’re still responsible for the loan, according to the major credit bureaus.

Recommended: What Is a Credit Bureau?

What Are Alternatives to Cosigned Loans?

Do parents have to cosign student loans? Not necessarily. Below are some options to think over instead of cosigning your child’s student loans.

Fill Out the FAFSA®

Filling out the Free Application for Federal Student Aid (FAFSA®) is the first step to figuring out how much federal (and frequently state) financial assistance your child is eligible for. You’ll add your financial information that will determine the amount of federal assistance, which includes Direct Subsidized Loans, Direct Unsubsidized Loans, and other student aid from the federal government, like grants and work-study.

Some states and colleges also base merit aid on FAFSA information, so the application is an important one for all types of financial aid, not just federal.

Help Them Establish Their Credit Score

There are also some other pathways to consider when trying to find loans without a cosigner. One good idea is to have your child start building their credit history. A credit score is typically enhanced over time as the record of their successful payments grows, along with other factors like their outstanding debt, credit mix, and more. A couple of pointers:

•   Your student might start by either getting a secured credit card at a credit union or other financial institution, then showing they can make timely monthly payments on a purchase.

•   If your student is trustworthy and mature, you could also consider adding them as an authorized user to a credit card you already have. You’ll be responsible for making the monthly payments, but they could benefit from your financial behavior.

Look into Scholarships

The FAFSA will help colleges determine what federal student aid, scholarships, and grants your child might qualify for, but don’t let your student stop there.

Merit scholarships come in all sizes and from diverse sources, including local and national organizations, heritage associations, and various writing and other contests sponsored by nonprofits and other organizations. It might help to look at groups that your family might be closely associated with, such as unions, professional associations, or alumni organizations.

Keep in mind that your child can apply for scholarships while they are still in college, because some are tied to college majors, and your student is likely to have settled on a major after the first year or two. This could open up scholarship options that couldn’t be considered before they declared a major.

Create a Budget

You might also be able to forego cosigning a student loan by making strategic decisions about education costs. Can your student reduce the overall cost of college by ditching the meal plan, living off campus, or even attending a significantly less expensive college?

Or, instead of paring down expenses, maybe your student could consider boosting their income to avoid the need for a cosigner on a student loan. One idea might be to start a low-cost side hustle. Another could be to take a year off to work — this may be enough to close the gap, avoiding the need for a loan altogether.

Consider Parent Loans

Parents who don’t mind shouldering more of the cost can also take out their own federal student loans with the Direct PLUS Loan, sometimes referred to as a “parent PLUS loan.”

Even though your student benefits from the loan, they are not the borrower, and you’ll be solely responsible for paying it back. Some parents may consider working out a repayment arrangement between themselves and their student. If this will be the expectation, however, it’s a good idea to discuss the arrangement with your student before taking out this type of loan.

Direct PLUS Loans can also be taken out by graduate or professional students. Whether a parent or a graduate student, there is a downside for the borrower. The interest rate for Direct PLUS Loans is often higher when compared to other federal student loans — 9.08% for the 2024-2025 school year versus 6.53% for Direct Subsidized Loans and Direct Unsubsidized Loans.

Recommended: Comparing Subsidized vs Unsubsidized Loans

The Takeaway

Deciding whether to cosign on a student loan is a significant financial commitment that requires careful consideration. While cosigning can help a student qualify for a loan and potentially secure better terms, it also means the parent is equally responsible for repayment.

If a parent is not wanting to cosign, students can look into other financing options, as well. This includes cash savings, scholarships and grants, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What does it mean to cosign a student loan?

Cosigning a student loan means a parent or other adult agrees to take equal responsibility for the loan. If the student fails to make payments, the cosigner is legally obligated to repay the debt.

Why might a student need a cosigner for a loan?

Many students have little or no credit history or income, which can make it hard to qualify for a private student loan on their own. A cosigner with good credit helps improve their chances of approval and may result in lower interest rates.

What are the risks of cosigning a student loan?

The biggest risk is that if the student misses payments, the cosigner’s credit could be damaged, and they would be responsible for repaying the loan. It can also affect the cosigner’s ability to qualify for other credit, like a mortgage or car loan.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-016

Federal student loans could be either Direct Loans or “indirect loans” until 2010, when Congress voted to eliminate the latter. Yet many borrowers of indirect loans, also known as Federal Family Education Loans (FFELs), continue to struggle with repayment today.

Here’s what student borrowers should know about the two different loan types.

Indirect vs Direct Student Loans

Indirect Student Loans

The Federal Family Education Loan Program was funded by private lenders (banks, credit unions, etc.), but guaranteed by the federal government. The program ended in 2010, and loans are now made through the Federal Direct Loan Program.

The government didn’t directly insure FFEL Program loans. Instead, it acted through a guarantor, which paid the lender if the borrower defaulted. Then, the government reimbursed the guarantor.

When it came to questions about payment, borrowers dealt with the lender, the guarantor, the servicer, or a collection agency — not the government.

Direct Student Loans

With a Direct Loan, made through the William D. Ford Federal Direct Loan Program, the funds come directly from the U.S. Department of Education, which gets the money from the U.S. Treasury. The loans are made by the Department of Education and backed by the federal government.

Direct Loans consist of Direct Subsidized and Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Before 2010, every school made its own decision about whether to participate in a direct or indirect loan program, or possibly both. But there were some differences in interest rates, fees, and repayment options of these types of student loans.

What Kind of Loans Do You Have?

If you’re thinking about how to best address your student loan debt, it’s important to know what kind of loan or loans you have, including whether they are Direct Loans or FFELs.

To figure out your loan types, log into your account on StudentAid.gov and click on “My Aid” in the dropdown section. In the “Loan Breakdown” section, you’ll see each loan you have and your loan balances. You can also find information there on who your loan servicers are, including their contact information, and your loan amounts. On each loan servicer’s website, you’ll find information about your monthly payments and payment history, and your loan interest rates and terms.

Repaying FFEL Program Loans

Even though indirect student loans ended on June 30, 2010, there are still 7.29 million borrowers who hold $165.4 billion in FFEL loans as of 2024.

Borrowers must consolidate their FFEL loans before they can apply for one of the income-driven repayment plans, which base monthly loan payments on your discretionary income and family size over a period of 20 or 25 years, typically resulting in lower payments.

FFEL loan holders also must consolidate loans to apply for Public Service Loan Forgiveness (PSLF), which allows those who work in qualifying public service jobs for the government or nonprofit organizations to have certain loan balances forgiven after 120 on-time payments.

Here are more on repayment options.

Income-Sensitive Repayment Plan

Only low-income FFEL borrowers may qualify for this FFEL repayment plan. The lender determines the monthly payment based on a fixed percentage of the borrower’s gross monthly income. Payments are made for a maximum period of 10 years.

Consolidating Your Loans

Consolidating loans with a federal Direct Consolidation Loan combines your loans into one loan with one payment. The interest rate on a Direct Consolidation Loan is the weighted average of the borrower’s current federal loans, rounded up to the nearest one-eighth of a percentage point.

This loan does not lower your interest rate, and may even increase the amount of interest that is paid over the life of the loan. If you decide to lengthen your payment period (for example, from 10 to 20 or even 30 years), your monthly payment may be lower, but the total interest you’ll pay over the life of the loan will most likely be higher.

A Direct Consolidation Loan may be an option for borrowers who want to streamline their payments rather than those who are looking to save money.

If you don’t have any indirect loans, you still can consider consolidating your Direct Student Loans. (Note that only federal student loans, not private student loans, are eligible for consolidation into a Direct Consolidation Loan.)

Refinancing Your Loans

Another option is to apply to refinance your student loans — federal, private, or both — into one new loan through a private lender. Ideally, the new loan will have a lower interest rate or better loan terms.

Before deciding to refinance federal loans, it’s important to note that when you refinance, you lose access to federal benefits. This includes income-driven repayment plans and Public Service Loan Forgiveness.

If you have a lower debt-to-income ratio after graduation and have built your credit over time since you first took out your student loans — and you don’t foresee a need for federal benefits — refinancing may be an option to consider, especially if you can qualify for a lower interest rate.

You can see how much you could save with our student loan refinancing calculator.

The Takeaway

Approximately 7.29 million borrowers are repaying FFEL Program loans as of 2024. The last of these “indirect loans” were issued in 2010, when federal Direct Loans largely took over.

Whether you’re repaying a FFEL loan, Direct Loan, or private loan, it’s a good idea to learn your options and figure out which makes the most sense for your situation.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What is an indirect student loan?

Indirect student loans are also known as Federal Family Education Loans (FFEL). These loans were discontinued in 2010. Before that time, the Department of Education worked with private lenders through the Federal Family Education Program to provide these student loans, which were backed by the federal government. Student loans are now made through the Federal Direct Loan Program. However, about 7.29 million borrowers in the U.S. are still repaying FFEL loans.

How do I know if my loan is direct or indirect?

To determine if your loan is direct or indirect, log into your account on StudentAid.gov and click on “My Aid” in the dropdown section. In the “Loan Breakdown” section, you’ll see each loan you have. Direct loans start with the word “direct,” while indirect loans start with “FFEL.”

What is better, a subsidized or unsubsidized loan?

A subsidized Direct loan is generally preferable to an unsubsidized loan. The main difference between them is the way the interest is handled. With a Direct Subsidized Loan, you won’t be charged interest on the loan while you’re in school or during the six-month grace period after graduation. With a Direct Unsubsidized Loan, interest starts accumulating from the time the loan is disbursed and you are responsible for paying that interest.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.