Author: Abigail Eun

Typically, it’s recommended that borrowers have a good credit score to access competitive student loan offers. But what if you have no credit at all?

Don’t fret — there are a variety of student loan options for borrowers with no credit.

Keep reading to learn how you can get student loans with no credit and to explore our top picks for lenders.

Can You Get Student Loans if You Don’t Have Credit?

It depends on the type of loan you are borrowing. For federal loans, you do not need to have credit to qualify. On the flip side, most private student loans will require you to have a strong credit history. 

However, there are still private loan options for those without a credit history. Borrowers can either apply for non-credit-based loan options or have a cosigner with a strong credit history cosign their loan. That said, borrowers should consider a cosigned loan option before non-cosigned, non-credit-based loans because the interest rates can be higher for the latter.

Student Loan Options if You Have No Credit

There are plenty of loan options available for prospective borrowers without any credit. 

Federal Student Loans

Experts recommend that borrowers exhaust their federal loan options before resorting to private loans. Federal loans have controlled interest rates, strong borrower benefits, and various repayment plans, making them the preferred option. 

Generally, most federal student loans have fixed interest rates that are set by Congress. This means that the interest rate on the loan will never change, protecting your interest rate from fluctuations due to the economy.

To borrow a federal student loan, you’ll need to submit the Free Application for Federal Student Aid (FAFSA). The FAFSA opens on October 1st and closes on June 30th.

Private Student Loans

If you opt for private student loans, look into the lenders below. Rather than searching for lenders one-by-one, we recommend comparing your no credit options with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders. 

Here are the best private student loans for no credit:

Ascent Non-Cosigned, Outcomes-Based Loan

Ascent’s Non-Cosigned, Outcomes-Based loan is a great option for high school upperclassmen (including DACA recipients and international students) with limited credit/income and no cosigner. Qualifying students must have a GPA above 2.9.

Fixed interest rate: 13.09% to 15.08%
Variable interest rate: 13.07% to 15.02%

Apply with Ascent.

View disclosures.

Edly IBR Loan

Edly’s income-based repayment (IBR) loan is not like your average student loan. Students who are approved for an Edly IBR loan do not make payments during school but can make payments based on their income after graduation.

IBR loans are best for borrowers who want a loan that doesn’t require a cosigner or have a minimum credit score, in addition to flexible repayment plans and competitive repayment terms. 

The APR on an IBR loan depends on your projected income, but the Edly IBR loan has a maximum 24% APR. 

Apply with Edly.

View disclosures.

Funding U

If you are a high-achieving undergraduate student with limited credit history and income, Funding U is the lender for you.

Funding U offers student loans without a cosigner, credit history, or income. Your eligibility as a borrower depends on your GPA and estimated future earnings. 

Fixed interest rate: 7.49% to 12.99%
Variable interest rate: Funding U does not offer variable interest rates.

Apply with Funding U.

View disclosures.

MPOWER

MPOWER offers non-cosigned loans to domestic, international, and DACA undergraduate and graduate students. MPOWER is available in all 50 states and offers special discount rates for responsible borrowing. 

Fixed interest rate: 13.74% (14.75% APR)
Variable interest rate: MPOWER does not offer variable interest rates.

Apply with MPOWER.

View disclosures. 

Closing Thoughts From the Nest

As a borrower, finding the best loan option for you is important for your future finances. As you sift through your options, be sure to compare loans across interest rates, repayment plans, and borrower protections.

To check your rates across multiple lenders at once, consider using Sparrow’s free search engine. You can review personalized offers from over 15 different lenders without harming your credit score.

With average college tuition costs rising every year due to inflation, it’s increasingly important to be aware of the costs associated with higher education.

One aspect of this is understanding what exactly tuition is, along with how it differs across factors like geographical location and institution type. 

Tuition vs. Cost of Attendance

Tuition and cost of attendance may seem like the same thing, but there is a significant difference between the two. 

Tuition is the base amount of money you pay to attend the institution and take classes, while the cost of attendance is the estimated total of expenses you will pay as a student, which includes the cost of tuition, fees, and other student expenditures. 

Cost of attendance = Tuition + Room and Board + School Supplies + Transportation Fees…

What is the Average Cost of Tuition in the US?

The average cost of tuition for a four-year, in-state, public institution is $9,377, while the average cost is $27,091 for out-of-state. For private institutions, the average cost of tuition for a non-profit is $37,641, while a for-profit costs an average of $18,244.

Average College Tuition by State

As you explore potential colleges, keep in mind that tuition can also be influenced by geographic region. Historically, public colleges in the northeast have been the most expensive, while the least expensive schools are in the Plains and the South. 

The table below shows the average total cost of college tuition by state, ordered from greatest-to-list.

State	Tuition & Fees	Tuition + Room & Board
Vermont	$17,593	$30,752
New Hampshire	$16,749	$29,222
Illinois	$14,579	$26,252
Pennsylvania	$14,532	$26,040
Connecticut	$14,487	$28,425
New Jersey	$14,184	$28,335
Massachusetts	$13,939	$28,317
Virginia	$13,931	$25,761
Michigan	$13,716	$24,777
Rhode Island	$13,697	$26,946
South Carolina	$12,544	$23,181
Minnesota	$11,836	$21,858
Oregon	$11,537	$24,517
Arizona	$11,410	$24,681
Delaware	$11,343	$24,862
Kentucky	$10,976	$22,317
Alabama	$10,617	$20,993
Maine	$10,377	$20,677
Tennessee	$10,271	$20,639
Hawaii	$10,197	$22,012
Ohio	$10,049	$22,860
Indiana	$9,656	$20,572
Louisiana	$9,656	$20,031
Maryland	$9,401	$22,380
Iowa	$9,373	$19,788
Missouri	$9,310	$19,394
Colorado	$9,269	$22,288
Kansas	$9,081	$19,082
North Dakota	$9,065	$18,057
South Dakota	$9,012	$17,177
Alaska	$8,849	$22,185
Wisconsin	$8,782	$17,875
Nebraska	$8,761	$19,352
Mississippi	$8,642	$19,221
Arkansas	$8,468	$18,262
New York	$8,416	$24,231
California	$8,401	$24,015
West Virginia	$8,252	$19,312
Oklahoma	$8,064	$17,283
Texas	$8,016	$18,325
Georgia	$7,525	$18,711
Washington	$7,485	$21,027
Idaho	$7,482	$16,518
New Mexico	$7,393	$17,113
North Carolina	$7,260	$17,113
Montana	$6,993	$16,931
Utah	$6,764	$14,653
Nevada	$6,434	$18,065
District of Columbia	$6,152	N/A
Wyoming	$4,785	$14,584
Florida	$4,541	$15,543

Private vs. Public Schools

Public institutions are funded by the government, while private schools are funded by tuition and endowment funds. 

Generally, private colleges have more expensive tuition than public schools. In the graph below, we can see that private four-year colleges have historically cost more than your average public four-year, public two-year, and private two-year school. 

However, it’s important to note that the average cost of attendance differs from student to student. 

A low-income student may receive more financial aid from private universities instead of public universities, given that several private universities are 100% need-based. On the other hand, it may be cheaper for an in-state, middle-income student to attend public schools instead of a private school, due to in-state grants. 

All this is to say that you should explore your financial resources at every school you are interested in, public or private. Most schools offer an online tuition calculator that estimates what the total cost of tuition may be for your financial standing. Reach out to the financial aid office if you have any questions.

Closing Thoughts From the Nest

As you explore your college options, be sure to make note of the average undergraduate tuition for the institutions you are interested in. Whether you plan to borrow student loans or not, it’s important to be mindful of how much your education costs. 

If you’re looking for private loans to finance your education, consider using Sparrow. Sparrow offers a free, online tool that allows you to compare pre-qualifying private loans across 15+ private lenders.

Both federal and private student loans can be used for educational expenses. While that typically means costs like tuition and fees, there’s a variety of items that fall under the umbrella. 

In fact, you can use your student loans for living expenses, child support, and even study-abroad programs.

Can I Get a Student Loan to Cover Living Expenses?

Yes, you can use student loans for living expenses. After your student loans are disbursed to your school, your school will usually return the remaining funds to you after tuition, room/board, and other costs have been paid for. 

These remaining funds can be used for a variety of expenses, such as institutional fees, transportation costs, and more.

What Counts as Living Expenses for Student Loans?

Any academically-related expense can be counted as a living expense for student loans. This doesn’t mean that you are strictly limited to purchasing school supplies or textbooks, however. 

Your student loans cover living expenses you have to pay as a student, such as rent, bills, groceries, and even furniture for your campus apartment. 

The following table outlines the most common expenses that student loans can be used for. 

Expense
Tuition and Fees + Room and Board	Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly. If you are opting for off-campus housing, your school will usually subsidize your rent up to the amount of housing costs you would have to pay if you lived on-campus. Your remaining student loans can be used to pay your bills.
Institutional Fees	If your school has mandatory health insurance, parking fees, or other fees, you can spend a portion of your student loans to cover these costs.
School-Related Living Expenses	Student loans can cover personal expenses that are necessary for your educational career. This includes groceries, new bed sheets, furniture for your apartment or dorm, and other living expenses.
Books and Supplies	Your student loans can cover anything from textbooks, notebooks, to a new book bag.
Transportation Costs	Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, and other expenses.
Child Care Expenses	If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, like daycare, baby food, and other child-specific necessities.
Study Abroad Expenses	If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.

What Doesn’t Count as Living Expenses for Student Loans?

Any personal costs that are not absolutely necessary as a student do not count as living expenses. The following table outlines what you can’t spend your student loans on.

Expense
Entertainment	Movie tickets, ice skating tickets, and other forms of entertainment do not count as a living expense.
Clothes	Unfortunately, buying a new wardrobe does not count as a living expense that can be covered by your student loans.
Vacation/Travel	While a spring break trip to Bali would be nice, you can’t use student loans to cover it. Personal vacations and travel do not count as a valid living expense to use your student loans on. However, your student loans can be used for study abroad programs that are approved by or administered by your school.
Down Payments	You cannot use your student loans as a down payment to buy a new car, house, or equivalent.
Debt	While it might be tempting to knock out some credit card debt with your student loans, your personal expenses do not count as a living expense. However, if you paid for academic or necessary living expenses with your credit card, an exception can be made.

Is It a Good Idea to Use Student Loans for Living Expenses?

Generally, it is okay to use student loans for living expenses. However, you should consider the cost of doing so before making the decision.

Likewise, you’ll want to make sure essential academic-related expenses are covered before covering potentially non-essential living expenses with loans.

Leftover amounts from your student loans should be saved for future, unforeseen academic expenses like books for next semester or sudden charges to your bursar account. 

You can consider other avenues for paying for your personal needs, such as picking up a new side hustle, tapping into your savings, or asking your parents for an allowance.

What Happens If You Use Student Loans for Something You Shouldn’t?

While no one is actively tracking what you spend your student loans on, you can face serious consequences if you’re caught for student loan misuse. 

Using your loan funds improperly is essentially breaking a contract, as you agreed to use your loans for academic expenses only in your promissory note. 

If you are caught for loan misuse, you may be reported to your school’s financial aid office and the federal Department of Education and have your loans taken away.

Best Student Loan Options to Cover Living Expenses

Here are some of Sparrow’s top picks for student loans that can cover living expenses. 

Arkansas Student Loan Authority: Best for Arkansas students or those attending institutions in the state.

Ascent: Best for borrowers without a cosigner, international or DACA students, or those with lower credit scores. 

Brazos: Best for borrowers who live in Texas.

College Ave: Best for borrowers seeking flexible repayment terms that match their budget.

Custom Choice: Best for borrowers seeking competitive interest rates, a flexible repayment plan, and strong borrower benefits.

Earnest: Best for borrowers looking for unique borrower perks and competitive interest rates.

Edly: Best for borrowers with no cosigner that are looking for an income-based repayment plan.

EDvestinU: Best for borrowers looking to work with a non-profit lender.

Funding U: Best for high-achieving undergraduate students, as Funding U assesses your ability to borrow based on non-traditional factors.

INvestEd: Best for residents of and students in Indiana.

MPOWER: Best for international, domestic, and DACA students, and those who don’t have a credit history or access to a qualified cosigner.

Nelnet Bank: Best for borrowers seeking competitive interest rates and a flexible forbearance policy.

Prodigy Finance: Best for international graduate students.

SoFi: Best for borrowers with a strong credit score or a creditworthy cosigner.

Closing Thoughts From the Nest

While student loans can be used for living expenses, be careful what else you use them for. While it may be tempting to use the funds to treat yourself to a fancy dinner or splurge on a new wardrobe for the semester, it’s important to use your student loans wisely. After all, student loans are borrowed money that you will have to eventually pay back in the future.

Consider using the leftover amount from your loans to make your first loan payment, or saving it for an academic rainy-day fund.

If you need to take out student loans to pay for educational costs, you’re not alone. With rising college prices, it’s no surprise that one in seven Americans currently hold student loan debt. 

If you’re a first-time borrower, you may be wondering, “How long does it take to get a student loan after submitting an application?” 

While the process of loan disbursement differs between private and federal loans, it’s useful to know the general timeline of what you should expect. 

How Long Does it Take to Get a Private Student Loan?

Generally, it takes around two to three weeks for funds to be disbursed after you submit your application. In the worst-case scenario, however, it may take up to two to three months if there are any delays. 

It’s important to note that turnaround times for private loans vary by lender. You’ll want to contact your lender directly for a definitive answer. 

How Long Does it Take to Get a Federal Student Loan?

After submitting the Free Application for Federal Student Aid (FAFSA), it will take anywhere from a few weeks to a few months for the funds to be disbursed to your school’s bursar. 

The FAFSA is an application that gauges how much federal aid you qualify for by asking you to fill in information about your family’s financial history. The application opens every year on October 1st and closes on June 30th. 

After your FAFSA is processed, your school will use the information to create a financial aid package for you. You should receive your package, which includes any federal loans you qualify for, around 3 weeks after submitting the FAFSA. If you choose to accept your aid amount, the funds will be disbursed accordingly. 

If there are leftover funds after your loans are used to pay off tuition, your college will most likely refund you the remaining balance after a few weeks. Note that some schools have a 30-day delay for first-time borrowers. 

How to Get Student Loans Faster

If you want to speed up the process of receiving your loan money, try out these quick tips. 

Use Sparrow

If you want to check what private loans you qualify for without having to send out multiple applications, consider using Sparrow. If you submit a free application with us, you can see all the private loans you prequalify for across 15+ different lenders.

In addition to comparing your options across projected totals and interest rates, you can see how different cosigners impact your loan terms. When using Sparrow, your credit score will not be impacted and you do not have to pay any fees.

Make Sure Your Application is Completely Filled Out

Before hitting submit on your loan applications, be sure to go back and triple-check that the application is completely filled out with accurate, up-to-date information. These couple of minutes will save you more time in the long run. 

With missing information, the lender will be unable to process your application and will have to contact you for any missing information. This can delay the process significantly.

Be Responsive to Emails 

Keep an eye on your emails after you submit your loan applications. If the lender(s) contacts you, you’ll want to respond as quickly as possible. After all, the quicker they have all the information they need, the quicker your loan will be processed. 

However, it is important to be alert about potential student loan scams. Your lender will never ask you to send any sensitive information over email or charge you an upfront fee. If you are contacted by a student loan scam, contact the actual lender immediately to report the incident.

How to Check the Status of Your Loan Application

For Federal Loans: Log into the account you created to submit your FAFSA to check the status of your federal loans.

For Private Loans: Contact the lender directly to check the status of your application. Depending on the lender, you will be able to check the status of your private loans online, by speaking with a worker on the phone, or via online chat.

Closing Thoughts From the Nest

The answer to the question, “How long does it take to get a student loan?,” varies between loan types and loan servicers. However, in general, expect at least 2-3 weeks minimum for your loans to be processed. If you don’t receive your loans for longer than expected, be sure to contact your loan servicer and/or your school’s student aid office.

Now that your student was accepted into their dream school, it’s time to figure out how to pay for their education (as if getting into college wasn’t difficult enough, eh?). From parent loans to student loans, you have a lot of options. Therefore, finding the most suitable way to afford educational costs can be difficult to navigate. Keep reading to learn more about the best parent student loans of 2024.

Jump Ahead > How Student Loans Work • Types of Student Loans • When to Consider Loans • A Parent’s Role • Parent Loans vs. Student Loans • Which Loan Option is Best?

7 Best Parent Student Loans

Below is a list of some of the best parent student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated parent student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders. 

How Do Student Loans Work?

Student loans are borrowed money that can be used to pay for educational expenses like tuition, room and board, school supplies, and more. Students can only qualify for these loans if they are enrolled at an accredited institution at least half-time. 

Student loans almost always accrue interest. Interest is a small percentage of the loan that is added on top of the total loan amount. Therefore, how much you originally borrow is not the amount you will pay back. Accordingly, it is essential that you choose your loans carefully and compare total cost projections.

Types of Student Loans

There are two main types of student loans you can borrow: federal student loans and private student loans. 

The main difference between federal and private student loans is who offers them. The federal government offers federal student loans. In contrast, private student loans are offered by credit unions, banks, and other private institutions. 

The following chart details the nuances of federal student loans and private student loans. 

	Federal Student Loans	Private Student Loans
Borrower Requirements	The Direct Subsidized Loan is only for undergraduates with financial need. Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.	No financial need is required; anyone can apply.
Cosigner Needed?	No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.	In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates	Interest rates tend to be lower than that of private student loans and are always fixed, meaning they do not change.	Interest rates tend to be higher for students because they lack a strong credit history. However, rates may vary with a cosigner. Interest rates can be fixed (meaning they do not change) or variable (meaning they change based on the economic market).
Borrower Protection Plans	The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.	Depends on the lender, but selections are often limited.
Credit Score Requirements	Typically, federal loans do not look at credit scores, except the Direct PLUS Loans.	Most private lenders will be looking for students and cosigners with strong credit histories and scores.
Borrowing Limits	For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year. For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.	High borrowing limit, up to 100% of the cost of attendance.
Grace Period	Federal student loans do not have to be paid if you are a current student who is enrolled at least half-time.  Direct Subsidized, Direct Unsubsidized, and the Federal Family Education Loan have six-month grace periods before you start making regular loan payments.	Some private loan lenders provide a six-month grace period, while others will require immediate repayment upon graduating, leaving school, or dropping below half-time enrollment.
Repayment Plans	The federal government offers eight repayment options: • Standard Repayment Plan • Graduated Repayment Plan • Extended Repayment Plan • Pay As You Earn Repayment Plan (PAYE) • Revised Pay As You Earn Repayment Plan (REPAYE) • Income-Based Repayment Plan (IBR) • Income-Sensitive Repayment Plan (ISR) • Income-Contingent Repayment Plan (ICRP)	Private student loans tend to have fewer repayment options in comparison to federal student loans.

When Should You Consider Student Loans?

Before pursuing student loan options, exhaust all other financial aid options. Specifically, this includes college savings accounts, scholarships, grants, and work-study. After all, borrowing money is far more expensive than spending it. 

Consider the following options to finance educational costs before resorting to student loans: 

College Savings Account

If you have a 529 Plan, a mutual fund, or a Roth IRA that you specifically created to finance your child’s educational costs, tap into them. Be sure to read the fine print so you are meeting withdrawal requirements.

Scholarships

Scholarships are a form of gift aid that is awarded based on academic merit, financial need, racial/ethnic group, specific affiliations, or outstanding achievements. 

If your child has received any scholarships, use that money to cover a portion of their college tuition. If not, encourage your child to continuously apply for scholarships. They are offered year-round and can amount to a hefty total. 

Grants

Grants are another form of gift aid that do not need to be paid back. They are offered by federal, state, public, and private entities.

Unlike scholarships, however, grants are awarded solely based on financial need. Your child should apply to any and all grants they qualify for. 

Work-Study

Work-study is a federal program that employs students with an on-campus job. Specifically, students can work for an allocated amount of hours and use their paychecks at their own discretion. Generally, only students with demonstrated financial need can qualify for federal work-study.

If there is still a lot of money left to pay after you’ve exhausted the above options, consider a student loan.

A Parent’s Role in the Student Loan Process

As first-time navigators in the student loan process, it may be difficult to draw the line in regards to how involved you or your student should be. 

Here are two ways parents can aid in the student loan process: 

1. Parents can help guide their children through the student loan process by explaining how it works. Student loans can be a great opportunity to involve your student in the family’s finances and teach financial literacy. Working with your child to find student loans and discuss long-term goals will emphasize the responsibility of student loan debt and help your child in the long run. 
2. You can be a cosigner for your child to help them qualify for private loans they may not otherwise qualify for. Unlike most federal loans, which do not require cosigners, students are generally unable to qualify for competitive private loan terms without a cosigner. If you have a strong credit history and are willing to put your name on a loan with your student, consider cosigning. It is a great way to strengthen the chances of your child receiving a more competitive rate. 

Parent Loans vs. Student Loans: What Should You Do?

Between parent loans and student loans, they both have their individual pros and cons. Consider your family’s financial needs as you choose between them.

Federal Parent PLUS Loan

The Parent PLUS loan is a parent loan offered by the federal government. This is the only federal loan option for parents.

To qualify for the Parent PLUS loan, you must:

• Be the biological or adoptive parent of a dependent undergraduate student (step-parents may qualify in certain cases)
• Not have an adverse credit history
• Meet general eligibility requirements for financial aid

If you borrow a Parent PLUS loan on or after July 1st, 2023, and before July 1st, 2024, the fixed interest rate is 8.05%, which may be relatively high for someone with a strong credit score. You may want to consider your private parent loan options because they may offer lower, more competitive interest rates. 

However, the main benefit of Parent PLUS loans is the potential for loan forgiveness. Between federal parent loans and private loans, determine which option is most viable for your family by factoring in loan forgiveness and borrowing cost projections. 

Pros and Cons of a Federal Parent PLUS Loan

Pros	Cons
You may have the option for federal loan forgiveness. Federal loans offer extensive borrower protection plans. Federal loans offer flexible repayment options. All federal loans have a fixed interest rate, so you’ll never have to worry about your rate increasing.	Parent PLUS loans have higher interest rates relative to some private parent loan options. Parent PLUS loans have origination fees. While an excellent credit score is not required, you must pass a credit check. Repayment begins immediately after the loan is disbursed. Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.

Private Parent Loan

Private landers (like banks and credit unions) finance private parent loans.

With a private parent loan, you borrow on behalf of your child to pay for their education. Even though the loan is for your student, you have the legal responsibility to pay back the loan because it was originated in your name.

Countless private parent loans are offered by different entities, meaning that each loan has its own repayment terms and interest rates. As you look into your private parent loan options, make sure to compare them side by side and read the fine print so you know exactly what you are getting out of each loan.

Pros and Cons of a Private Parent Loan

Pros	Cons
You can qualify for competitive interest rates if you have good or excellent credit. Given the amount of private lenders in the market, you will have many loan options to consider. You can borrow a private parent loan regardless of your relationship with the student. There are low or no origination fees.	Private parent loans are not eligible for loan forgiveness. There are limited repayment options and borrower protections, in comparison to federal loans. Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. Interest rates may be higher for parents with low or bad credit.

Private Student Loan

Like private parent loans, private student loans are offered by private entities. 

However, with a student loan, your child borrows the loan. While you can help your child with their loan payments, they have the legal responsibility to pay back the loan in full. If you cosign the student loan, you and your child are both legally responsible for paying back the loan. 

Oftentimes, students are unable to qualify for a private student loan or receive competitive terms without a cosigner. This is because they have weak, or nonexistent, credit histories. As a parent, you can offer to cosign the loan so they qualify for more competitive loan terms. 

Pros and Cons of a Private Student Loan

Pros	Cons
Your student can build up a strong credit history. Borrowing limits usually meet, or are higher than, the tuition costs. There is no financial need requirement. The loan is in the student’s name if you do not cosign for it.	Private student loans do not qualify for loan forgiveness. Students may require a cosigner to qualify. Private student loans without a cosigner may have higher interest rates than federal student loans. If you cosign the loan, your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.

Which Loan Option is Best for Parents?

The best loan option is the one that works best with your family’s needs. 

As you are exploring federal and private parent/student loan options, consider your financial standing. Is your family more suited to pay for a private loan with a low interest rate, or would your family benefit more from more flexible repayment options?

Do you want your child to borrow a student loan so they have skin in the game, or would you rather borrow a parent loan because you qualify for a more competitive interest rate and loan terms?

These are all questions you should consider as you compare your options. Remember, there is no one “right” answer. The only right choice is the one you know works best for your family.

Closing Thoughts From the Nest

As you and your student continue to navigate through the student loan process, remember to take a breath and relax. Navigating this process can feel overwhelming, but we’re here to help. 

When comparing loan options, consider using Sparrow’s free search tool. If you submit a free application with us today, you can see all the private loans you qualify for across 15+ lenders. We’ll even help you view the long-term loan projections based on different repayment plans and compare loan terms with different cosigners.

Borrowing a student loan is a big decision. Figuring out how much to borrow, where to borrow from, and how to navigate getting the money where it needs to go can be confusing.

Before anything else, you should consider what you intend to use the loan money for. While student loans need to be used for academic expenses, there are a variety of items that fall under that umbrella.

If you’ve ever wondered, “What can student loans be used for?,” you’re in the right place. Keep reading to learn about the do’s and don’ts for student loan usage.

What Can Student Loans Be Used For?

Student loans can only be used for academic expenses. Here are some of the common expense categories that qualify as an academic expense. 

Expense
Tuition and Fees + Room and Board	Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly.
Institutional Fees	If your school has mandatory health insurance, parking fees, or other institutional requirements, you can spend a portion of your student loans to cover these costs.
School-related Living Expenses	Student loans can be allotted to cover personal expenses that are necessary for your educational career (ex. a desk lamp to study, new bed sheets, or a microwave).
Books and Supplies	Your student loans can cover anything from textbooks, to notebooks, to multicolor highlighters, to a new bookbag.
Transportation Costs	Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, etc.
Child Care Expenses	If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, whether that be daycare, baby food, or other child-specific necessities.
Study Abroad Expenses	If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.

Generally, federal student loans and private student loans have the same guidelines for usage, but make sure to double-check with your lender before spending any money. 

What Student Loans Can’t Be Used For

Your student loans cannot be used to cover any personal expenses like:

• Travel: Unless you go on a study abroad/school trip, you cannot use your student loans to fund personal travels. 
• Entertainment: Dinners with friends, movie tickets, and retail therapy cannot be covered by your student loans. 
• Personal finances: Down payments for a house, credit card payments, and other personal finances do not qualify as educational expenses. 

These expenses must be paid for with your own money. 

What Happens If You Use Student Loans for Something Else?

As tempting as it may be, it is extremely ill-advised to use your student loans for anything other than educational expenses for the following reasons:

1. Using your student loans for other expenses is essentially breaking a legal contract. The promissory note/loan agreement you signed when you took out the loans specifically outlines that you agree to only use your loan for educational expenses. Therefore, breaking this legal agreement you signed under “penalty of perjury” can have serious consequences.  
2. While schools don’t actively look for student loan misuse, if you are caught for this charge, you may be reported to the federal Department of Education and have your student loan money taken away. 
3. Beyond all legal reasons, misusing your student loan money can put you in more debt than you initially started with. Depending on your loan repayment plan, your debt will begin to accrue interest either after you graduate or from the first loan disbursement. If you use your student loans to buy nonessential items, you will end up having to pay more for the accrued interest on your debt. 
4. If you deplete your student loan balance quickly, you may not have enough money to pay for future educational expenses. 

What About Student Loan Refunds?

After covering all of your educational costs, including transportation, school supplies, and institutional fees, you may still have some money left. 

Experts recommend that you do the following with the remaining student loan refund balance you have:

1. Return the money if your lender does not charge prepayment penalties. In addition to lowering your balance, returning the extra money will prevent unnecessary interest from accruing. Contact your lender to determine how you can return any excess student loan amounts. 
2. Save the money. You may have future educational expenses you can put the money toward. Put the remaining balance into your savings account for unforeseen circumstances. 
3. Use the money on your initial loan payments. With the extra cash you have, you can lower your debt even before repayment starts. If your repayment starts as soon as the loan is disbursed, you won’t have to pay out of pocket for your initial repayment.  

Closing Thoughts From the Nest

Using your student loans responsibly is crucial to be out of debt quicker. Remember to use your student loans for academic purposes only and return or save what remaining balance you may have. 

If you’re looking to explore private loan options, consider using Sparrow. Sparrow allows you to visualize the cost of your loans side-by-side so you can compare options and know exactly how much you’ll be paying off in your repayment period. 

Borrowing student loans is a common practice to afford educational expenses. That said, deciding which option is best can be a difficult decision to make. In the debate of student loan vs. parent loan, here’s what you should consider.

What to Consider Before Pursuing Loans

Before considering any loan, maximize all available financial aid. This includes scholarships, grants, and work-study. Both scholarships and grants are free aid, which means you won’t have to pay it back down the line. Work-study, on the other hand, is earned aid, meaning your child will have to work to receive the funds.

Only after exhausting all free and earned aid options should you consider borrowed money. When you do get to the point of considering loans, consider both a student loan and parent loan to determine which is better for you.

>> MORE: The different financial aid options for students

Student Loan vs. Parent Loan: What’s the Difference?

The main difference between a student loan and a parent loan is who borrows the loan. A student loan is borrowed by a student, while a parent loan is borrowed by a parent.

While parents can cosign a student loan, the student remains the primary borrower. This distinction determines who is ultimately responsible for the loan, at least on paper. Plus, for whoever’s name is on the loan, their credit score and history will be affected. 

With that in mind, there are three main ways you can go about borrowing a loan:

>> MORE: Will my credit score drop after paying a student loan?

Loan Options As a Parent

(Option 1) Student Borrows the Loan By Themselves

Pros	Cons
Your student opens their (possibly) first line of credit and begins to build their credit score and history.	Your student could potentially receive unfavorable loan terms because they do not have a strong credit history (or a credit history at all), or they may not qualify for the loan at all.
Your student becomes financially responsible and builds financial skills necessary in the real world.	Your student takes on new outstanding debt, which could impact their credit score and chances of being able to buy a house or open new significant lines of credit in the future.

What is the Best Student Loan Option for my Child?

If your child decides to borrow a student loan, consider federal loan options first. Experts recommend maximizing federal aid options before pursuing private options due to federal benefits like flexible repayment options, potential loan forgiveness, and strong borrower protections.

Additionally, federal student loans tend to have lower interest rates than private student loans and don’t require credit checks for students. This often makes federal student loans more affordable and accessible than private student loans.

While private loans are a good option, federal options should be pursued first.

>> MORE: Compare the best private student loan rates:

(Option Two) Student Borrows the Loan and You Cosign

Pros	Cons
Your student receives better loan terms because you, a creditworthy borrower, have cosigned the loan.	Cosigning a loan can increase your debt-to-income ratio, reducing your chances of opening new lines of credit.
Your student begins to build their credit score and history.	Any late or missed payments will negatively impact your credit history and the student’s credit history.
Your student becomes financially responsible and builds the financial skills necessary in the real world.

Should I Cosign for My Student’s Private Loan?

You should only cosign your child’s private loan if you are in a financial place to do so. As a cosigner, you are equally responsible for the loan. So, in the event that your child fails to make a payment, you’ll need to be able to make it.

Before you cosign your student’s private loan, be sure to read the fine print of the loan terms. Consider the following questions: Are there cosigner release terms? What will happen to the loan if you go bankrupt or default on it?

>> MORE: Does cosigning a student loan affect my credit score?

(Option Three) You Borrow a Parent Loan

Pros	Cons
You receive more favorable loan terms because you have a stronger credit score and history than your student.	Your student is not building their credit score and history from managing outstanding debt.
You protect your student’s credit history from having outstanding amounts of debt, which can help them when applying to open lines of credit in the future.	You are 100% responsible for paying the student loan debt (on paper).

What Parent Loan Options Do I Have?

As a parent borrower, you have two loan options:

Federal Parent PLUS Loan
The federal Parent PLUS loan is designed for parent borrowers. While a credit check is required to be eligible, you can add an endorser if necessary.

If you are a creditworthy borrower, you may find that the interest rate for the Parent PLUS loan is higher than what you qualify for with a private lender. In that case, a Parent PLUS loan may not be the better loan option. 

>> MORE: Everything you need to know about a Parent PLUS loan

Private Loan
Private loans are offered by private companies like banks and credit unions. To qualify for a private loan, you will need a relatively strong credit score and history. Depending on your qualifications as a borrower, you may receive competitive loan terms.

>> MORE: Best college loan rates for parents:

Is It Better to Get a Student Loan or a Parent Loan?

Between student loans and parent loans, the option ultimately depends on your family’s financial situation and what works best for you and your student. Therefore, it is important to explore your loan options to find the best one on the market. 

The most important thing about this process is making sure that looking for a loan is a collaborative process between you and your child. You will want to reinforce the importance of student borrowing and the responsibility that comes with loans from the onset so that your child learns important financial skills that will last them a lifetime. 

Closing Thoughts From the Nest

While comparing a student vs a parent loans may be a tedious process, it is an important decision that will affect either you or your child’s finances for the foreseeable future. Perform due diligence and use the situation as a learning opportunity for your child.
If you are looking for private student loans, consider exploring your options with Sparrow. If you submit a free application with Sparrow, you can compare what private loans you qualify for across 15+ different lenders.

On August 24th, 2022, President Biden released his comprehensive, wide-scale plan for student loan forgiveness. This student loan relief package has nearly $4 billion dollars in aid and is the largest student loan forgiveness package to date.

The three-part package was designed to lift the financial burden of student loan debt for millions of Americans, primarily middle-class federal student loan borrowers. 

From new changes within the Public Service Loan Forgiveness program, to loan payment refunds, to debt cancellation, there’s quite a lot of information you don’t want to miss.

Keep reading for a complete guide to Biden’s student loan relief. 

What’s Inside?
What Does the Plan Include? → Debt Cancellation, Revamping PSLF and Cutting Monthly Payments in Half, Reducing the Cost of College • Who is Eligible? • How to Apply for Relief • How to Get a Refund on Payments • When Will Debt be Forgiven? • Is Forgiveness Taxable? • Key Takeaways

What Does Biden’s Student Loan Plan Include?

Biden’s student loan relief plan includes three parts:

1. Up to $20,000 in Debt Cancellation for Qualifying Individuals
2. Revamping the Public Service Loan Forgiveness Program and Halving Monthly Undergraduate Loan Payments
3. Reducing the Cost of College and Keeping Institutions Accountable

Up to $20,000 in Debt Cancellation for Qualifying Individuals

Depending on your income and Pell Grant eligibility, federal loan borrowers can receive debt cancellation of up to $20,000.

Income Requirements: Federal loan borrowers must make an individual income of less than $125,000 or $250,000 for joint incomes. 

Pell Grant Eligibility:

• If you are/were a Pell Grant recipient: You are eligible for $20,000 in debt cancellation.
• If you are/were not a Pell Grant recipient: You are eligible for $10,000 in debt cancellation. 

To have a smooth transition back to loan repayment, the pause on federal student loan repayments has been extended to December 31st, 2022.

Key Takeaways:

• Only federal borrowers who have an income less than $125,000 (or a joint income of less than $250,000) are eligible for student loan forgiveness.
• Pell Grant recipients are eligible for $20,000 in loan forgiveness.
• Non-Pell Grant recipients are eligible for $10,000 in loan forgiveness.
• The pause on federal student loan repayment was extended to December 31st, 2022.

Revamping the Public Service Loan Forgiveness Program and Halving Monthly Undergraduate Loan Payments

Under Biden’s three-part student loan relief package, the administration is cutting some monthly undergraduate loan payments in half and also improving the Public Service Loan Forgiveness (PSLF) program.

Temporary Changes to Public Service Loan Forgiveness (PSLF) 

If you are a federal borrower who has worked at a nonprofit, in the military, or at a federal, state, tribal, or local government, you may be eligible to receive loan forgiveness. 

While Biden’s new plans for the Public Service Loan Forgiveness program are unclear as of now, there are previous, temporary changes that should be accounted for. 

Time-limited changes have been made to the Public Service Loan Forgiveness (PSLF) program that will only apply until October 31st, 2022. These changes have temporarily made it easier for borrowers who have worked as public servants to receive loan forgiveness through PSLF. 

Previous Rules	New Rules
Only federal Direct Loans qualify for PSLF.	Direct, FFEL, and Perkins Loans qualify for loan forgiveness. Federal loans that are not Direct loans must be consolidated to be eligible.
You must be under a 10-year Standard Plan or an income-driven repayment plan to qualify for PSLF.	Repayment under any repayment plan counts for loan forgiveness.
You must have made on-time payments to qualify for PSLF.	Late and partial payments can qualify for PSLF. Payments before consolidation also qualify.
You must have made 10-years worth of monthly payments to receive loan forgiveness.	You can still apply to PSLF even if you have not made 10-years worth of payments (or 120 monthly payments). You must have worked for a qualifying employer during your repayment period to earn credit for payments made. You will not receive loan forgiveness until you make 120 payments.
You must have worked for a qualifying employer at the time of your PSLF application.	You can still receive forgiveness if you were not employed by a qualifying employer at the time of your PSLF application.
If you received Teacher Loan Forgiveness, the period of service does not count for PSLF.	The period of service that you received Teacher Loan Forgiveness for also counts for PSLF.

Despite the temporary changes to the PSLF program, the following still remain the same:

• You must have made 10-years worth of monthly payments to qualify for loan forgiveness. While you can still apply to PSLF without having made 10-years worth of monthly payments, you will not receive credit until you meet the quota. 
• Periods of loan default and in-school deferment do not qualify for PSLF.
• You must have been employed by a qualifying employer to be eligible for PSLF. 

Note: Because these changes are only temporary, you must submit an application before October 31st to have your student loan canceled under these interim qualifications. While President Biden has proposed additional reform of this program, it is unclear what exactly will be done.

Who Qualifies for PSLF?

	Example 1	Example 2
Scenario	Robert is a full-time employee at an NGO that specializes in providing educational supplies to under-served elementary schools. He’s been working at this NGO for about five years. Robert had to take out federal Direct Loans during his undergraduate study and has been making payments throughout his career. Not all of his payments were on time or in full.	Wanda is an orthopedic surgeon who has been working at the North Carolina Orthopedic Clinic for seven years. She took out federal Perkins loans to pay for her undergraduate education and federal Direct loans to pay for medical school. Wanda has been making payments straight out of medical school and the entirety of her career, which has been roughly ten years of payments.
Should They Apply for PSLF?	Yes, Robert can and should apply for the Public Service Loan Forgiveness program. Under the time-limited changes to the program, Robert qualifies to receive forgiveness for any past payments, even if they were not on time or in full. Because Robert has been making payments for five years, he will need to make five years worth of monthly payments before he can receive loan cancellation.	Yes, Wanda can and should apply for the Public Service Loan Forgiveness program. First, she will have to consolidate her Perkins loans and Direct loans through the Direct consolidation loan program. Then, Wanda can count her ten years of payments for PSLF and receive loan forgiveness.

Halved Monthly Undergraduate Loan Payments

If you are a low-income federal borrower, you may qualify to have your monthly undergraduate loan payments cut in half. 

The U.S. Department of Education is proposing a new income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income. Your discretionary income is your income after any tax deductions or other mandatory charges. So, if you’re a low-income borrower whose discretionary income is $2,500, your monthly loan payment cannot exceed $125 (125 is 5% of $2,500). 

Under this new income-driven repayment plan, undergraduate student loan payments will be lowered by more than $1,000 for current low-income borrowers and future borrowers.

Key Takeaways:

• The U.S. Department of Education is creating a new, income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income. 
• There are new, temporary changes to the Public Service Loan Forgiveness (PSLF) program that make it easier for public servants to receive loan forgiveness through PSLF. 

Reducing the Cost of College and Keeping Institutions Accountable

President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.

Furthermore, to keep college costs low and hold institutions accountable for hiking up tuition, the Department of Education has reinstated the enforcement unit in the Federal Student Aid office to do the following: 

• Publish an annual watch list of educational institutions with the worst debt levels
• Propose a new rule that holds programs accountable for leaving their graduates with unpayable debt
• Request institutional improvement plans from institutions with concerning student debt outcomes

Key Takeaways:

• Biden has signed for the largest increase of Pell Grants in over a decade and for nearly $40 billion in financial aid for colleges and universities.
• The U.S. Department of Education has reinstated their enforcement unit to hold colleges accountable for hiking up college costs. 

Who is Eligible for Biden’s Student Loan Relief?

Federal borrowers whose individual income is less than $125,000 (for married couples, joint income should be less than $250,000) are eligible for Biden’s student loan cancellation. 

→ For Pell Grant recipients: up to $20,000 in debt cancellation.

→ For non-Pell Grant recipients: up to $10,000 in debt cancellation.

Federal borrowers who work/worked as public servants and qualify for the Public Service Loan Forgiveness (PSLF) program are eligible for student loan relief. 

How to Apply for Biden’s Student Loan Relief

For federal borrowers who are currently on an income-driven repayment plan, loan forgiveness may happen automatically. This is because the Department of Education already has your income on file. 

Others will need to complete an application to certify their income. The U.S. Department of Education has not yet released an application for President Biden’s loan forgiveness program. However, Bharat Ramamurti, the deputy director of the White House National Economic Council, stated that the application will be released in early October. Once the application is made available to the public, it should be submitted by November 15th so that your debt is forgiven before the payment pause ends.

How to Request a Refund of Payments Made During the COVID-19 Pandemic Forbearance

Since March 2020, borrowers have not been required to make federal student loan payments, nor have their loans accrued any interest, due to the federal forbearance. During this time, many borrowers took advantage of these benefits, making substantial payments on their loans, some paying off their balances entirely. However, if borrowers knew their debt would be forgiven, many would have refrained from making such payments.

So, the U.S. Department of Education is allowing borrowers to request a refund for any payments made “during the payment pause (beginning March 13, 2020) [by contacting] your loan servicer to request that your payment be refunded.”

For example, let’s say you had $12,000 in federal student debt when the COVID-19 pandemic forbearance began in March 2020. You paid back $6,000 from that period of time up to now, leaving you with $6,000 in debt. If you contact your loan servicer for a refund, you will receive your $6,000 back. In turn, your student debt balance goes back up to $12,000. 

→ If you are a Pell Grant recipient who makes less than $125,000 in a year, you are eligible to receive up to $20,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 in student loan debt is wiped out, leaving you with no debt. 

→ If you make less than $125,000 in a year but were/are not a Pell Grant recipient, you are eligible to receive up to $10,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 is cleared by $10,000, leaving you with $2,000 in debt. 

To receive a refund for any payments made during the forbearance, contact your loan servicer and request a refund. 

When Will My Student Debt Be Forgiven?

Borrowers can expect to see their student loan debt forgiven within four to six weeks of submitting their application. For federal borrowers who are already on an income-driven repayment plan, loan forgiveness may happen automatically depending on the timeline of federal loan relief.

Is Biden’s Student Loan Forgiveness Taxable?

While the Biden administration stated that its loan forgiveness program won’t be considered federal taxable income, this provision does not apply at the state level. It is within the jurisdiction of individual states to decide whether loan forgiveness is taxable income.

In fact, the Tax Foundation identified 6 states that are predicted to count loan forgiveness as taxable income. While the list is updating frequently as states enact temporary tax exemptions, the following are currently said to be taxing it:

• Arkansas
• Indiana
• Minnesota
• Mississippi
• North Carolina
• Wisconsin

Closing Thoughts From the Nest

Biden’s student loan relief package is full of new updates for federal borrowers, primarily public service workers and low-income individuals. 

Key Takeaways

Federal borrowers who earn less than $125,000 per year are eligible for student loan forgiveness. Individuals who have received Pell Grants can receive up to $20,000, while individuals who did not receive Pell Grants can receive up to $10,000.

The Department of Education is proposing a new income-driven repayment plan for low-income federal borrowers. The new income-driven repayment plan will cap monthly undergraduate loan payments at 5% of the borrower’s discretionary income.

President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.

There are new changes to the Public Service Loan Forgiveness program that make receiving loan forgiveness easier for public servants.

You can receive a refund for any loan payments made from the beginning of forbearance (March 2020) until now by contacting your loan servicer.

Loan forgiveness may be taxable, depending on the state that you live in.

Applications for loan forgiveness will come out in early October for federal borrowers whose income is not on file. It is recommended that applications are submitted before November 15th, 2022.

After being accepted into college, it’s important to see what options you have for financing the cost of your education. While scholarships, grants, and federal work-study aid should always be accepted first, you may wind up considering student loans as well. Though the process may seem daunting, we’ve simplified it for you with a step-by-step guide. Keep reading to learn how to apply for student loans.

Jump Ahead > Types of Student Loans • What to Do Before Applying • How to Apply for Federal Loans • How to Apply for Private Loans • FAQ

Types of Student Loans

There are two main types of student loans on the market: federal student loans and private student loans. 

Federal student loans are offered by the federal government, while private student loans are offered by private organizations, businesses, and other autonomous entities. 

Below is a list of some of the best student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders. 

Generally, it is recommended that you borrow federal student loans before private student loans. This is because federal student loans have lower interest rates, more flexible repayment options, loan forgiveness, and stronger borrower protection plans, as opposed to private student loans. 

What to Do Before You Apply for Student Loans

Picking up debt is a large responsibility. Before applying for student loans, be sure to exhaust all other possible financial aid options for students.

Student loans need to be paid back in full, along with any interest that accumulates during the life of the loan. This means that you pay for more than what you’ve borrowed, and failure to do so can negatively affect your financial standing.

This is why it is crucial to acquire as much unborrowed money as you can to defray the cost of tuition. There are four ways that you can pay for your educational costs that do not require you to borrow money: scholarships, grants, and work-study.

Scholarships

Scholarships are a form of financial aid that is free and does not need to be paid back. They are offered based on, but not limited to, academic merit, financial need, athletics, your field of study, and any extracurricular achievements. 

Scholarships are offered all year round by countless organizations, businesses, states, schools, counties, districts — you name it. 

To apply for scholarships, you will generally need the following materials:

• An essay answering a prompt that is decided by the organization offering the scholarship
• Your transcript
• Proof of academic attendance 

Here are some of our favorite scholarship engines:

1. Sallie Mae’s Scholarship Search Tool
2. Bold.org
3. Scholarships.com
4. Chegg
5. Fastweb
6. Niche
7. Cappex

Grants

Grants are another form of financial aid that is free and doesn’t need to be paid back. Unlike scholarships, grants are offered on a need-based basis only. This means that you must demonstrate financial need to qualify for a grant. 

Generally, grants are offered by the federal government, state governments, institutions, businesses, organizations, etc. 

You can find grants with an easy search of the web or through the following search engines:

• CollegeScholarships.org 
• CollegeGrants.org

Work-Study

Work-study is a federal student aid program that provides undergraduate and graduate students with the opportunity to have a part-time job on campus that helps fund their education. It’s important to note that receiving work-study does not guarantee you a job at your institution, but rather, it provides you with the opportunity to obtain one in which funding has been set aside to pay for.

You will see whether or not you received work-study aid on your financial aid package after submitting your FAFSA, along with the amount of aid you are eligible to receive. Unlike scholarships and grants, you will need to work in exchange for the work-study funds you are eligible for.

How to Apply for Federal Student Loans

As highlighted earlier, federal student loans should be your first option if you are looking to borrow student loans. Federal student loans typically have lower interest rates, stronger borrower protections, and more flexible repayment options. 

Here’s how to apply for a federal student loan in three easy steps.

Step 1: Submit the FAFSA

The Free Application for Federal Student Aid (FAFSA) is an application that you must submit to receive financial aid from the federal government, your school, and in some cases, scholarships and grants.

The U.S. Department of Education uses your information on the FAFSA to calculate how much federal financial aid you are eligible for. In turn, colleges use this information to calculate your financial aid package. Some scholarships and grants require you to submit your FAFSA results to verify that you are in the eligible financial standing to be awarded. 

The FAFSA opens on October 1st and closes on June 30th. It is strongly recommended that you submit your FAFSA as close to the opening date as possible because some financial aid is served on a first-come, first-served basis. 

What Information Do I Need to Submit the FAFSA?

You need the following materials (most of which will need to come from your parents) before you submit the FAFSA:

• Your Social Security Number (never go off memory!)
• Your parent’s/parents’ Social Security Numbers 
• Tax Information
  • Tax Returns
  • IRS W-2
  • Parent(s) tax information
• Family income
• Records of untaxed income
  • Child support
  • Veteran benefits
• Information on any financial assets you have
  • Cash in your checking and/or savings account
  • Investments like stocks and bonds
  • Business assets
  • Mortgages

If you are completing the FAFSA without the support of your parents, or as an independent, don’t worry. There are other ways to complete the form.

Step 2: Evaluate Your Financial Aid Offer

Your financial aid offers will start trickling in after you receive word from the schools you’ve been accepted to. It’s time to evaluate your financial aid offers and determine which is the best one for you. 

Start by creating a spreadsheet with the following four columns: 

1. School Name
2. Cost of Attendance → The total estimated cost of attending the school, including tuition, housing, meal plans, etc.
3. Free Aid → Any scholarships and grants you’ve received, whether from the institution itself or external sources/organizations.
4. Net Price Without Loans → The difference between the cost of attendance and the free aid you’ve received. This is how much you would need to pay out of pocket or borrow in student loans.

School	Cost of Attendance	Free Aid	Net Price without Loans
University A	$73,103	$46,051	$27,052
University B	$67,392	$23,249	$44,143
University C	$54,205	$18,674	$35,531

Creating a method to compare your aid offers is crucial as the actual cost to attend may be quite different from the initial cost of attendance after factoring in free aid. For example, in the above table, you can see how University A has the highest sticker price. Yet, with free aid, it winds up being the least expensive option.

Step 3: Accept the Loans

After identifying the school and financial aid offer that is best fit for you, go ahead and accept the financial aid package. Each school will have its own unique process for accepting financial aid. However, most will provide you with a login to an online portal in which you can click “accept” on the aid you’d like to receive.

Remember: Always accept your offer in the following order: scholarships/grants → work study → loans.

How to Apply for Private Student Loans

As a refresher, experts recommend that you exhaust your federal financial aid options before turning to private student loans. Generally, private student loans have higher interest rates, limited borrower protection plans, and less flexible repayment options.

Additionally, it’s often difficult for first-time borrowers (especially students) who have a limited credit history to qualify for a loan with good terms to begin with.

So, private loans should only be utilized to fill in the gaps that financial aid and federal loans do not cover. If you do opt to borrow one, here are the steps you should follow:

Step 1: Gather the Necessary Information

When applying for private loans, the information you will need will be similar to what is required for the FAFSA.

• Your Social Security Number 
• The cosigner’s Social Security Number (You may not need this if you are not borrowing with a cosigner.)
• Tax Information
  • Tax Returns
  • IRS W-2
  • Cosigner’s tax information
• Family Income
• Proof that you need additional aid (This is usually a form or a letter than can be obtained from your school’s financial aid office.)
• Information on any financial assets you have, such as:
  • Cash in your checking and/or savings account
  • Investments like stocks and bonds
  • Business assets
  • Mortgages
• A list of schools you are interested in attending
• A list of any grants or scholarships you’ve received and their amounts

Step 2: Know How Much You Need to Borrow

It’s time to calculate how much money you need to borrow. Refer back to your financial aid package. If you did not receive any scholarships or grants, determine what you can contribute out of pocket. Subtract that, plus what you received in federal student loans, from the overall cost of attendance. Doing so will show you how much you need to borrow in private student loans to cover the cost. 

Private student loans can cover the entire cost of your tuition, but it is recommended to minimize the amount of money you borrow so you can defray the amount of interest that you accrue.

If you need assistance calculating the exact amount of money that you need to pay, contact your school’s financial aid office for clarification. It’s better to be safe than sorry.

Step 3: Complete the Sparrow Application

Sparrow wants to help you find the perfect lender to finance your educational costs. Our platform helps borrowers just like you find and compare private student loans across 15+ premier student loan lenders. You can also compare how different cosigners affect the loan to determine which option is best for you.

The Sparrow application is free and will not affect your credit score. When you’re ready to begin the private student loan process, complete the Sparrow application.

You can also reach out to your school’s financial aid office for assistance with finding a private student loan lender. You can ask your institution for a list of preferred lenders or speak with a financial aid worker whose job is to assist you with any financial matters.

Step 4: Compare Student Loan Offers

When you’re comparing student loans, here are some key factors that you should look out for:

Cosigner	Do you need a cosigner to qualify for the loan with you? Do you have a cosigner who is willing to sign the loan with you? Does the loan have a cosigner release policy, and if so, what is it?
Interest Rate	What is the interest rate of the loan? Do you have a variable interest rate (an interest rate that changes based on the economy) or a fixed interest rate (a set interest rate that stays the same)?
Repayment Plan	What is the repayment plan for the loan?  Does the loan offer a grace period (a period of time where you do not need to make loan payments) after you leave school, or will you be making payments during the school year?
Loan Origination	Does the loan have an origination fee (a fee that you need to pay to “create” the loan?)
Borrower Protection	Does the loan offer loan forbearance and deferment?

Consider your loan priorities as you sift through options: do you prefer a loan with a short repayment plan and a low interest rate, or a loan with cosigner release terms? Is loan forbearance or deferment a must-have, or do you think you can manage without it?

Speak with your parents, your school’s financial aid office, and adults that you trust so you can make the best decision for yourself. You should be thoroughly aware of all the loan terms and have a plan for repaying the loan. 

Think long-term and consider where you’ll be one year, five years, or ten years ahead with the loan. 

Step 5: Select the One You Like the Best and Submit A Formal Application

After you’ve identified the private student loan that best fits your needs, submit a formal application for the loan.

If you are submitting multiple formal applications for private student loans, submit your applications within 30 days of each other. By doing this, you will not incur a hard inquiry for each loan that you apply for. Rather, it will be viewed as “rate shopping,” and you will only receive the impact of one hard inquiry.

If you are approved for the loan, the loan amount will be disbursed directly to your school. 

Frequently Asked Questions About Applying for Student Loans

Do all students qualify for student loans?

No, not all students qualify for student loans. Both federal and private loans have a baseline of requirements that borrowers must meet to be eligible to apply for the loan, such as attending an accredited university, meeting the age requirement, being a U.S. citizen in certain cases, etc.

Even if you do meet the baseline requirements, this does not mean that you qualify for all federal and private loans. With private student loans, most students do not qualify on their own and usually require a cosigner to help strengthen their loan application for private student loans.  

Be sure to use Sparrow to check whether you qualify before submitting a formal application and incurring a hard credit check. 

How long does it take for a student loan to be approved?

It can take anywhere from a few weeks to a few months for a student loan to be approved. The time needed to approve a loan depends on the lender. 

When do you need to apply for student loans?

The Free Application for Federal Student Loan (FAFSA) opens on October 1st and closes on June 30th. You must submit the FAFSA to be eligible for federal financial aid, including student loans, grants, work-study, and scholarships. Submit your FAFSA as close to the opening date as possible. 

After accepting all federal financial aid, you should apply for private student loans as early as possible. It often takes several weeks for a loan to be approved. You will want to be approved for the loan and receive the loan amount before the funds are due on your school so that you don’t rack up any late payment fees.

Do student loans go to your bank account?

No. Once approved, the loan amount is disbursed directly to your institution. Student loans do not go to your bank account.

Can you be denied a student loan?

Yes, you can be denied both federal student loans and private student loans. 

You can be denied for federal student loans based on financial eligibility requirements, having defaulted on a previous federal loan, incarceration, and other reasons. Address the reason why you were denied, and apply again the following year. 

For private student loans, you usually are denied for a low credit score, a weak credit history, or an insufficient cosigner. Consider applying again after raising your credit score and/or with a cosigner with a stronger credit score.

Closing Thoughts From the Nest

Applying for student loans can be a long process, so get started as early as you can. Remember to maximize scholarships, grants, work-study, and federal financial aid as much as you can before applying for  any private student loans.

If you need any assistance finding private student loans, consider using Sparrow’s online search tool to compare loan offers from 15+ lenders.

In the United States, 48 million borrowers owe a cumulative total of $1.75 trillion in student loan debt. As we can see, while student loans can cover a significant portion of educational costs, it means that you’ll owe a significant portion as well.

If you plan to take out student loans to pay for the cost of education, you’ll want to prepare for the new responsibilities you’ll have as a borrower. 

Here’s what you need to know about how student loans work.

Jump Ahead > What Are Student Loans? • Types of Student Loans • How Much Can You Borrow? • When Do I Need to Pay Back My Student Loans?

What Are Student Loans?

Student loans are a type of loan that specifically covers educational costs like tuition, school books, supplies, as well as room and board. There are two types of student loans that you can borrow: federal student loans and private student loans. Undergraduate students, graduate students, professional students, and even parents of students can take out student loans. 

To qualify, however, you must enroll in an accredited institution. 

Types of Student Loans

It is recommended that students give preference to federal loans over private student loans because they are generally more affordable and borrower-friendly. However, most students need to take out a blend of both to cover the entire cost of tuition. 

Federal student loans and private student loans have many differences that borrowers should be mindful of.

Federal Student Loans

Federal student loans are offered by the federal government. There are three types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. 

Direct Subsidized Loan	The Direct Subsidized Loan is for undergraduate students who demonstrate financial need. The federal government pays the interest on the loan while you are in school, during your grace period, and also during any deferment periods.
Direct Unsubsidized Loan	The Direct Unsubsidized Loan is available for undergraduate, graduate, and professional students from all financial standings. Unlike the Direct Subsidized Loan, the federal government does not pay for the interest during school, your grace period, or any deferment periods. Interest accrues throughout the entire life of the loan.
Direct PLUS Loan	Within the Direct PLUS Loan exists the Parent PLUS Loan and the Grad PLUS Loan.  The Parent PLUS Loan is available to parents of undergraduate students, and the Grad PLUS Loan is available to graduate and professional students. Interest accrues throughout the entire life of all Direct PLUS Loans.

To borrow a federal student loan, you must submit your Free Application for Federal Student Aid (FAFSA). The FAFSA opens every year on October 1st and closes on June 30th. 

You do not need a cosigner or a minimum credit score for federal student loans, except for the Direct PLUS Loan.

Federal student loans also come with a handful of borrower protections, such as:

• Loan deferment: pausing payments on your loan without any interest accrual
• Loan forbearance: pausing payments on your loan with interest accrual
• Loan forgiveness: forgiving your loan balance so that you no longer are in debt 

Private Student Loans

Unlike federal student loans, which are provided by one entity, private student loans come from an array of lenders. Thus, each lender will set their own loan terms, interest rates, borrower qualifications, and everything in between. 

Private student lenders are more selective with who they lend and offer competitive loan terms to. Because college students usually do not have sufficient enough credit histories and scores to be deemed trustworthy borrowers, private student lenders usually do one of the following:

1. Require a cosigner, or someone who agrees to take responsibility for the loan if the borrower fails to.
2. Give out less favorable loan terms, such as higher interest rates or shorter repayment plans to raise the stakes to keep students from defaulting.

Generally, private student loans do not offer any borrower protection plans like loan forbearance, deferment, or forgiveness unless you have special circumstances like disability, military service, etc. Additionally, seeking any needed assistance is the responsibility of the borrower. 

Federal Student Loans vs Private Student Loans

Loan Type	Federal Student Loans	Private Student Loans
Borrower Requirements	The Direct Subsidized Loan is only for undergraduates with financial need; Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.	No financial need is required; anyone can apply.
Cosigner Needed?	No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.	In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates	Interest rates tend to be lower than the interest rates of private student loans and are always fixed, meaning that they do not change.	Interest rates tend to be higher for students because of their lack of a strong credit history; may vary with a cosigner. Interest rates can be fixed (meaning that they do not change) or variable (meaning that they change based on the economic market).
Borrower Protection Plans	The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.	Depends on the lender, but selections are often limited.
Credit Score Requirements	Typically, federal loans do not look at credit scores except the Direct PLUS Loans.	Most private lenders will be looking for students & cosigners with strong credit histories and scores.
Borrowing Limits	For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year. For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.	High borrowing limit, up to 100% of the cost of attendance.
Repayment Plans	Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period where you do not pay to make regular loan payments after graduation, after dropping out, or enrolling less than half-time. Interest accrues during the grace period for the Direct Unsubsidized Loans and not for the Direct Subsidized Loans.  The federal government offers eight different types of repayment options: the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), Income-Based Repayment Plan (IBR), Income-Sensitive Repayment Plan (ISR), and the Income-Contingent Repayment Plan (ICRP).	Private student loans tend to have fewer repayment options in comparison to federal student loans.

How Much Can You Borrow in Student Loans?

Your borrowing limit depends on the type of student loan that you take out.

Federal Student Loans

For federal loans, your borrowing limit depends on your year in school, dependency status, and your Estimated Family Contribution (EFC), which is calculated through your FAFSA application. The maximum borrowing limits, however, are as follows:

Direct Subsidized Loan	Dependent Undergraduate: $3,500 – $7,500 per year ($31,000 aggregate loan limit) Independent Undergraduate: $3,500 – $12,500 per year ($57,500 aggregate loan limit)
Direct Unsubsidized Loan	Dependent Undergraduate: $5,500 – $7,500 per year ($31,000 in total) Independent Undergraduate: $9,500 – $12,500 per year ($57,500 in total) Graduate/Professional Student Limit: $20,500 per year ($138,500 in total)
Direct PLUS Loan	Covers the difference between the cost of attendance and any received financial assistance.

Private Student Loans

For private loans, the lender you work with determines how much you can borrow. Most private lenders cover the entire cost of attendance, though others have a cap of up to $500,000. 

When You Borrow a Student Loan, Where Does the Money Actually Go?

When you borrow a student loan, the money is disbursed to your school directly. The lender handles the process of getting the money to your school, and any remaining funds are distributed to you based on your school’s policy.

When Do I Need to Pay Back My Student Loans?

When you begin paying back your student loans depends on the type of student loan you borrowed and the repayment plan that you choose. 

Federal Student Loan Repayment

For all federal student loans, you will have a grace period where you do not have to make payments on your student loan. The grace period begins after leaving school or graduating and ends after six months.

It’s important to note that interest accrues during the grace period for Direct PLUS Loans and Direct Unsubsidized Loans, however, but not for Direct Subsidized Loans.

After this grace period is over, your loan payments will start. Depending on loan type, you may have a choice between one of the eight repayment options offered for federal student loans:

Standard Repayment Plan	Payments are made at a fixed amount for up to 10 years. All federal student loan borrowers are eligible for this plan.
Graduated Repayment Plan	Payments are lower at first and increase every two years so that the loan is paid off within 10 years. All federal student loan borrowers are eligible for this plan.
Extended Repayment Plan	Payments can be fixed (set amount) or graduated (increasing amounts per every two years) and are made for up to 25 years. Only Direct Loan borrowers with more than $30,000 in debt are eligible for this plan.
Pay As You Earn Repayment Plan (PAYE)	Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information. To qualify for a PAYE repayment plan, borrowers must have borrowed a loan after October 1st, 2007 and received a disbursement on or after October 1st, 2011.
Revised Pay As You Earn Repayment Plan (REPAYE)	Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off 20 years after your undergraduate study or 25 years after your graduate or professional study will be forgiven. Any Direct Loan borrowers with certain loans are eligible for this plan.
Income-Based Repayment Plan (IBR)	Payments will be 10-15% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off after 20 years or 25 years will be forgiven. Borrowers must have high debt in comparison to their income.
Income-Sensitive Repayment Plan (ISR)	Your monthly payment will be based off of your annual income and will remain as such for up to 15 years. Borrowers must have FFEL Program loans to qualify for an ISR repayment plan.
Income-Contingent Repayment Plan (ICRP)	Your monthly payment will be either 20% of your discretionary income or the amount that you pay on a 12-year repayment plan adjusted to your income. Any Direct Loan borrower with specific loans are eligible for this plan.

Private Student Loan Repayment

With private student loans, there are four common repayment plans across the industry:

Immediate Repayment	You begin making loan payments as soon as the loan is disbursed, meaning you begin making payments while you are in school.
Interest-Only Repayment	You begin making interest loan payments, or paying for only the interest of the loan, as soon as the loan is disbursed.
Partial Repayment	You begin making partial loan payments, or paying for only a portion of the interest that is accrued for the loan, as soon as the loan is disbursed.
Deferred Repayment	Similar to the grace period that is offered by federal student loans, you do not start making loan payments until six months after leaving school.

Closing Thoughts From the Nest

Student loans may not be the world’s most fascinating or enjoyable topic in the world, so we commend you for taking the time to do your research. Informing yourself as a borrower is key to managing your finances without being bogged down by student loan debt. 

If you want to see which private student loans you qualify for, consider using Sparrow’s free online tool. If you submit an application with us today, you can compare all of your private loan options across 15+ lenders.