Student Loans

The golden rule of student loans is simple: exhaust federal options before touching private loans. Federal student loans carry protections, repayment flexibility, and forgiveness options that private loans legally cannot match.

Federal student loans (always check first)

• Direct Subsidized Loans — for undergraduates with demonstrated financial need. The government pays interest while you're in school.
• Direct Unsubsidized Loans — for undergrads and grad students, no need requirement. Interest accrues from disbursement.
• Direct PLUS Loans — for grad students and parents of undergrads. Credit check required (for adverse credit events, not score).
• Direct Consolidation Loans — combine multiple federal loans into one with a weighted average rate.

To apply for any federal student loan, complete the FAFSA at studentaid.gov. There's no credit check for most federal loans.

Private student loans: when and why

Private student loans make sense only after you've maxed out federal options and still have a funding gap. They come from banks, credit unions, and specialty lenders (Sallie Mae, SoFi, Earnest, College Ave, etc.).

Approval criteria for private student loans:

• Credit score — most lenders require 650+ for approval at reasonable rates. Best rates usually require 720+.
• Income — the lender wants to see ability to repay.
• Co-signer — most undergraduates need a co-signer. This makes the co-signer 100% responsible if you default.

Co-signer release: ask before you sign

Many private student loans advertise co-signer release after X on-time payments. Read the fine print. Some lenders have release rates in the single digits because their criteria are unrealistic. If co-signer release is important to you, ask what percentage of eligible borrowers actually get released.

Refinancing student loans

Refinancing replaces one or more existing loans with a new private loan, ideally at a lower rate. Consider refinancing if:

• You have strong credit (720+) and stable income
• Your current rates are meaningfully above current market rates
• You have no intention of using federal repayment programs (income-driven, PSLF)

Income-driven repayment (federal loans only)

The federal system offers several income-driven repayment (IDR) plans that cap your monthly payment as a percentage of discretionary income. The specific plans and formulas change with regulation — check studentaid.gov for current options.

IDR is not available on private loans. This is often the single biggest reason not to refinance federal loans.

Public Service Loan Forgiveness (PSLF)

PSLF forgives the remaining balance on Direct Loans after 120 qualifying monthly payments while working full-time for a qualifying employer (government, most nonprofits). If you're in a qualifying career, PSLF can be extraordinarily valuable — potentially forgiving $100,000+ tax-free.

Before you apply for any student loan

1. Complete the FAFSA, even if you think you won't qualify for need-based aid. Many schools use it for institutional aid as well.
2. Exhaust grants, scholarships, and work-study before borrowing.
3. Max out subsidized federal loans first, then unsubsidized, then PLUS.
4. Only then consider private loans — and shop 3+ lenders.
5. Never borrow more than your expected first-year salary total, across your entire degree.

Last reviewed: January 2026 · Federal loan terms are subject to regulatory changes.