The Low Down on Applying for College Loans

In a whirlwind of college preparation, student loans are often a confusing element of an already stressful journey. From subsidized to unsubsidized loans and FAFSA to payment plans, there are many facets about the student loan process of which those applying should be aware.

To start, students must be enrolled at least half-time in a degree or certificate program to receive federal loans. To find her loan eligibility, a student must fill out a Federal Application for Student Aid (FAFSA). To do this, she should visit and submit information from her and her parent’s tax returns. When the form is completed, a student then receives an estimation of her Direct Subsidized and Unsubsidized Student Loans.

Direct Subsidized Loans are available based on the amount of financial need a student demonstrates on her FAFSA. Applicants may receive these loans for any period of time up to 150 percent of the published length of their programs. For instance, if one is enrolled in a four-year bachelor’s degree program, she may take subsidized loans for up to six years. While one is in school and during a six-month grace period following graduation, the U.S. Department of Education pays interest on Direct Subsidized Loans. So, students are often able to wait until they have a steady income stream before having to pay back their loans.

Direct Unsubsidized Loans do not offer any additional financial benefits. They are simply the maximum amount of money one can take in public loans. In contrast, unsubsidized student loans are not based on financial need; rather, they are determined by one's school and are based on cost of attendance and overall financial aid packages. Applicants are responsible for paying the interest on Direct Unsubsidized Loans immediately after they are taken. If one chooses not to pay interest during and after her time in school, the interest will accumulate and will be added to the principle amount of her loan.

For students enrolled in certain health profession programs, additional Direct Unsubsidized Student Loans may be available. These students should talk to the financial aid office at their schools for information about the annual and aggregate limits on their unsubsidized loans.

If a student is still unable to afford tuition after taking both Direct Subsidized and Unsubsidized Loans, she may want to consider a more affordable school. However, there are a few additional loan options. Parents of dependent students—anyone who isn’t over 24, married, a veteran, a member of the armed forces, a ward of the court, or a declared independent—may be eligible for Direct PLUS Loans, which are in the parent's name instead of their student’s. Additionally, some students take out loans from private banks or credit card companies to fund their schooling; however, this often results in incredibly high interest rates and is unadvisable for most young people.

Colleges generally tell students how to accept their loans and provide students online portals that contain necessary financial information. Once accepted, loans are automatically applied to school expenses such as tuition, fees, and room and board. Any additional money will be given directly to the student.

Once a student graduates, she will receive repayment information from a “loan servicer,” which is a company that collects and handles Direct Federal Loan payments. Students should work with their loan servicers to find a repayment plan. Generally, repayment plans are 10 to 25 years of monthly payments. Students unable to repay their Federal Direct Loans can work with their loan servicer to change payment plans. Additionally, certain situations—such as participation in federal volunteer programs, military service, or grant programs—will qualify applicants for “loan forgiveness,” through which part of one's debt may actually be canceled.

Although student loans can be confusing, intimidating, and downright terrifying, they are – for many – the key to funding a college education. Maybe it’s time to face the beast head-on and take the first step toward funding your future.


Well done, Sylvan! Thanks for covering such an important topic. You'll definitely make great use of all this information as you head into college! – MckennaUW Law School (2017-07-18 20:01)
I wish someone had told me this stuff a LOT earlier -- it would have taken the fear out of applying for loans! – AarushiMadison, WI (2017-07-19 15:01)