Student Loans

As many college students in the US know, it’s tough to be in school. With tuition costs rising across the board at most schools, sometimes earning a degree can seem like an impossible task.


Drastic measures are called for when things get serious, and this is where student loans come into play. Most lenders won’t lend money to the average college kid, so there are companies out there ready to step up and finance your education.


The catch? You sign on to pay back the loan with interest, of course. If you know where to look, it’s easy enough for someone looking to get their degree while struggling financially to find a lender willing to give them a chance. That’s why this post breaks it all down for you. You’ll learn all the ins and outs of student loans and the top lenders.

  • Fixed APR
  • Amount
  • Min Credit
  • 5.65%–12.95% (with autopay)
  • $2,001–$200,000
  • Not specified
Citizens Bank
  • 3.23%–10.95% (with autopay)
  • $1,000–$350,000
  • 620
College Ave
  • 2.94%–12.99% (with autopay)
  • $1,000–100% (Max. $150,000)
  • Not specified
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

How do Student Loans Work?

How student loans work depends on what type of loan the person has and who is lending them the money. 

There are two major types of student loans: federal and private. Federal student loans tend to offer better benefits than private ones, so these are usually the most popular kind of loans. However, not everyone can qualify for federal student loans, which is why private ones are still popular. 

The way that the person gets their loan depends on who they get it from. If someone takes out a federal loan, then they need to start by filling out the FAFSA form that is sent to colleges and universities around the country. Depending on what type of school you attend, you will be required to fill out different forms and documents.

If you attend a for-profit school, then you will need to go through the Department of Education’s TEACH grant program. To qualify for this type of loan, students must agree to teach in their field of study for at least four years after they graduate. If someone takes out a private loan, then they will need to fill out paperwork from the bank or lending company.

Hot Tip:

Federal student loans tend to offer better benefits than private ones, so these are usually the most popular kind of loans.

Requirements to Qualify

To qualify for federal loans, students need to prove that they are enrolled in an accredited school. They also need to prove their citizenship or residency status. Private lenders may have additional requirements that students must meet before they can qualify for the loan, depending on the financial institution.


To be considered for a student loan, you will need to fill out paperwork in order to provide proof of the following: citizenship status, grade point average (GPA), financial means (income and assets), family’s expected contribution toward your education, etc. You also need to make sure that the school you attend is participating in the federal student loan program.


People must prove that they can pay back the loan by showing how much money they earn, their credit score and savings account balances, etc.

For federal student loans, students need to be enrolled in a degree program and cannot have any previous credit issues. If someone has had problems with their credit in the past, then they may want to consider turning to private lenders who will not check their history. However, these types of loans tend to have higher interest rates and stricter repayment plans than federal loans.


Types of Student Loans

There are two main types of student loans: federal and private. Federal student loans tend to be given out by financial institutions, such as the Department of Education or large banks like Chase and Wells Fargo. The government directly lends money to students who need it for school expenses. These loans usually have lower interest rates than their private counterparts and also come with other benefits. Private student loans, on the other hand, come from companies like Sallie Mae and can be given out to students who do not meet the requirements for federal loans or do not want a loan through the government.

Federal Loans:

The federal government offers several different types of student loans that vary in terms and conditions. Depending on the loan, students may be required to pay interest while they are attending college or put off repaying it until after they graduate. Some options that students have include:

  • Direct Subsidized Loans:

With these loans, the federal government will pay for part of your interest rate while you are in school at least half-time.

Federal Direct Subsidized Loans are another type of loan that does not require students to pay back the money until they have graduated from college and landed a job. In fact, students who meet certain requirements do not have to pay back the loan at all.

  • Direct Unsubsidized Loans: 

This type of loan allows students to borrow money from the federal government and pay interest as they go. However, the government will not cover any of this interest rate for students who take out loans during their first four years in college.

  • Perkins Loans:

These student loans come with a 5% interest rate and are available to students who attend a school with an agreement in place with the federal government.

  • Parent Loans:

First-time college students can borrow money from the federal government for their education through the Parent Loan for Undergraduate Student (PLUS) program. Parents must be creditworthy in order to qualify for this type of loan, but borrowing is not limited to the cost of tuition.

  • Federal Family Education Loans (FFEL): 

These loans are no longer being offered as part of the government’s education financing program, but those who already have one do not need to worry about their terms or repayment options.

Private Loans:

The federal government does not directly lend out money for private loans. Instead, students need to turn to a bank or lending company for help. However, private loans can cover more expenses than federal loans and are usually issued by large financial institutions like Sallie Mae and Wells Fargo.

How to Pay off Student Loans

When it comes time to repay student loans, there are a lot of different options available. First, students should know how much they owe and the interest rate for their loan(s). Next, they need to decide whether they want to pay over five years or ten years. If you do not pay all of your loans at once, then you will have to file a separate application every time you want to make a payment.


The main benefit of federal student loans is the ability to repay them over an extended period of time without accruing extra interest charges. If students can afford it, it is best for them to pay their loans back within ten years. In this case, they will have to pay less interest in the long run. However, if you cannot afford to pay this much every month, then it is a better idea for students to go with a shorter repayment term and a lower monthly payment.

Students should not worry too much about choosing a repayment option because they can always change their minds after going through an application process. Once students make their decision, they can find out how much money they owe and the scheduled payment date on an online account. If you apply for a federal consolidation loan, then it is a good idea to read a guide before you complete your application.

Student loan pic 1

Should You Refinance your Student Loan?

Refinancing is when someone takes out a new loan to pay off their old one, essentially getting a new loan on more favorable terms.

Refinancing your student loans with a private lender makes it possible for an individual to get a lower interest rate and/or monthly payment. It also gives them the opportunity to pay their student loans off over time instead of all at once. 

However, the benefits of refinancing do not stop there. When it comes time to search for a student loan refinance, students should always ask how much they can save after comparing different lenders and plans. 

It is also wise to review customer reviews before you decide who to work with and contact your current lender as they may be able to help you refinance your loan.

Students who want to refinance their student loans need to fill out an application so that the lender can determine if they are eligible to do so. 

If yes, then you may be able to receive a new rate and monthly payment that works for you! It is important for applicants to remember that refinancing their student loans will not get rid of their debt entirely. 

You will have to work with your lender to set up a payment plan that you can afford, which is why it is important for borrowers to check their rates and qualifications before they sign on the dotted line.

Hot Tip:

It is also wise to review customer reviews before you decide who to work with and contact your current lender as they may be able to help you refinance your loan.

How to Consolidate Student Loans

Most lenders offer the option to consolidate loans. This process rolls all student debt into one payment with one interest rate and usually reduces or eliminates fees.


Consolidation is less expensive than maintaining multiple payments because borrowers are charged only once for origination costs, regardless of how many loans they have consolidated.


Consider consolidating when you are unable to afford the monthly payments on your loans. Be aware, however that consolidation does not reduce the total amount you owe, and it extends the repayment period to as much as 30 years, depending on how much debt you have.


A word of caution: if you consolidate higher-interest private loans with lower-interest federal student loans, then your debt-to-income ratio, or DTI, will be higher. This is because you are replacing low-interest loans with high-interest ones. This may make it more difficult for you to qualify for other kinds of loans in the future.


If you are considering consolidating your student loans, here are some factors to consider:

  • You can consolidate student loans through the federal program. This is usually easiest if you have only federal loans, but it does not hurt to check with your lenders to make sure all of your loans are eligible.


You can consolidate student loans into one private loan by choosing a private lender who will act as your consolidator. Keep in mind that some lenders may require higher credit scores than the minimum required by federal guidelines, charge origination fees and higher interest rates, and/or require cosigners/collateral for loans to students with low credit scores.

Student loan pic 2

Frequently Asked Questions (FAQ)

Federal student loans, private student loans, and refinance student loans are the loan products students have at their disposal.

You’ll first need to fill out a Free Application for Federal Student Aid (FAFSA®) form. The output will then determine what loan product you access. Alternatively, you can approach private lenders like the ones listed above.

Federal student loans are the most preferred for students looking for financing.

Repayment period for a student loan can go as long as 20 years.

That depends on your lender. But, typical student loans have a repayment set at $50.00.

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