Key Takeaways
- File the FAFSA first, every year — federal loans come with income-driven repayment, forgiveness eligibility, and fixed rates that no private lender matches.
- Most major banks (Chase, Bank of America, Wells Fargo) exited student lending years ago. Your real private-loan options are PNC, Citizens, Sallie Mae, and online specialists like College Ave and Earnest.
- Private lenders do a soft pull for prequalification and a hard pull only when you formally apply — prequalify with at least three lenders before committing.
- Apply for private loans 30 to 60 days before tuition is due. School certification takes time, and disbursement is not instant.
Filing the FAFSA is step one. Not because it’s the only source of student loans, but because skipping it locks you out of federal protections, income-driven repayment, potential forgiveness, subsidized interest, that no private lender will replicate. Everything else in this article assumes you’ve done that first.
Step 1 – Federal Student Loans Through the FAFSA
Federal student loans come from the U.S. Department of Education, and the application route is singular: the Free Application for Federal Student Aid, available at studentaid.gov. The FAFSA opens on October 1 each year for the following academic year. Filing early matters more than most students realize. Some states run their own grant programs off FAFSA data, and several award money until funds are exhausted rather than on a fixed calendar.
Here’s what you need to complete the FAFSA: your Social Security number, your FSA ID (a username and password you create at studentaid.gov), your most recent tax return or IRS Data Link access, and bank and asset information. If you’re a dependent student, you’ll need all of that for at least one parent as well. The form itself takes most first-time filers about 45 minutes.
After you submit, your school’s financial aid office receives your Student Aid Index, calculates what it can offer, and sends you a financial aid award letter. That letter will typically bundle grants, work-study, and loans together. Read it carefully before accepting anything, the mix matters.
Once you decide to accept federal loans, the process has two required steps before money moves: you sign a Master Promissory Note (a legal agreement to repay), and you complete entrance counseling, which is a short online module explaining your rights and responsibilities. Both happen at studentaid.gov. After that, your school certifies your enrollment and disburses funds directly to your student account, usually a few days before the semester starts.
For the 2025-2026 academic year, undergraduate federal Direct Loans carry a fixed rate of 6.53% for subsidized and unsubsidized loans. Graduate students pay 8.08% on unsubsidized loans. Graduate PLUS and Parent PLUS loans are at 9.08%. These rates reset each July 1 based on the 10-year Treasury note plus a fixed add-on set by Congress. The key feature is that they are fixed for the life of the loan, which matters a lot when you’re trying to project payments ten years out.
Dependent undergraduates can borrow up to $5,500 in their first year of federal Direct Loans, rising to $7,500 by their third year and beyond. Independent students get higher limits. Graduate students can borrow up to $20,500 per year in unsubsidized loans. PLUS loans can cover the remaining gap up to the full cost of attendance.
Step 2 – Free Money First: Grants and Scholarships
Before you borrow a dollar, exhaust the money you don’t have to pay back. The federal Pell Grant, also awarded through the FAFSA, goes up to $7,395 per year for the 2025-2026 award year and does not require repayment. Many states layer additional grants on top of federal aid, and your school may have institutional grants in the mix as well. Private scholarships exist for nearly every background, major, and circumstance imaginable, databases like Fastweb and the College Board’s scholarship search are a reasonable starting point.
This is not a detour from the borrowing conversation. A student who borrows $25,000 less over four years, even at a modest 6.5% federal rate, saves roughly $275 per month in payments on a 10-year repayment plan. That’s $33,000 in total over the life of the loan. Time spent on scholarship applications is almost certainly worth more per hour than most part-time jobs.
Step 3 – Federal Work-Study
If your financial aid award letter includes work-study, that’s worth considering before adding more loans. Work-study is a federally subsidized part-time employment program, the federal government pays a portion of your wage, which makes schools and campus employers more willing to hire you. It won’t cover full tuition, but it reduces the gap you need to borrow. The catch is that work-study funds are use-it-or-lose-it: you have to earn the money through actual hours worked, and unearned amounts don’t convert to grants.
Step 4 – Private Student Loans: Banks, Credit Unions, and Online Lenders
If federal loans, grants, and work-study leave a gap, private student loans fill it. The process is different from federal, the protections are weaker, and the rates depend heavily on credit. But for many borrowers, private loans are a legitimate part of a complete financing plan. The discipline is in using them last and borrowing only what remains after federal aid is maximized.
When my sister was consolidating $74,000 in private debt across four lenders, one thing that came up repeatedly was how differently each lender handled certification delays. Two of her original loans had been disbursed late because her school’s financial aid office took longer than expected to verify enrollment. She’d accepted those loans without any buffer in the timeline and nearly missed her tuition deadline. Thirty to sixty days before tuition is due is the minimum lead time. Build in more if it’s your first time applying at a new school.
How the Private Loan Application Process Works
Private lenders do a soft credit pull when you prequalify, this gives you a rate range without affecting your score. The hard pull comes only when you formally apply. This is why you should prequalify with at least three lenders before choosing one. Lenders are pricing off your FICO at the moment of application, and the same borrower can get meaningfully different quotes on the same day because lenders weight credit factors differently and price to different risk buckets.
After you submit the full application, the lender contacts your school to certify that you’re enrolled, what your cost of attendance is, and whether the loan amount exceeds the gap remaining after other aid. This certification step is not within the lender’s control, it happens on the school’s timeline. Once certified, funds go directly to the school. Any excess over tuition and fees gets returned to you, but most lenders structure disbursements to land close to the cost of attendance figure certified by the school.
Which Banks Still Offer Student Loans
Here’s the reality that surprises most borrowers: the majority of large national banks have exited student lending entirely. Chase stopped making student loans in 2013. Bank of America, Wells Fargo, US Bank, and TD Bank have all since followed. If you walk into a branch expecting to apply for a student loan, most major bank branches will turn you away or point you to a third-party partner.
The banks that are still actively originating private student loans as of mid-2026 include PNC Bank, Citizens Bank, and Sallie Mae. Sallie Mae is technically a private student loan bank, it was split off from its government-sponsored origins years ago and now operates as a private lender, though many borrowers still think of it as quasi-federal. It isn’t. Read the terms accordingly.
PNC’s student loan product offers both fixed and variable rate options. Citizens Bank offers a multi-year approval feature that lets returning students lock in terms without reapplying each year, which reduces hard-pull accumulation. Sallie Mae is one of the few lenders that doesn’t require enrollment at least half-time for certain loan types, which can matter for students taking lighter courseloads.
Online Lenders That Fill the Gap
The more competitive end of private student lending has largely moved to online specialists. College Ave, Earnest, Ascent, and SoFi are the names that consistently appear when you compare the best private student loans across the market.
College Ave advertises rates starting around 3.99% variable and 3.49% fixed, but the footnote on its rate disclosure page specifies that the lowest rates assume a creditworthy cosigner, automatic payment enrollment (which comes with a 0.25% rate reduction), and the shortest available repayment term. Most borrowers without an established credit history and a strong cosigner will land somewhere in the 6% to 13% range. That spread is wide enough to matter. On a $15,000 loan over ten years, the difference between 6% and 13% is about $67 per month and roughly $8,000 in total interest over the life of the loan.
Earnest is distinctive for offering customizable repayment terms by the month rather than forcing you into preset 5, 10, or 15-year buckets. If your math works better at a 9-year term, you can set that. Ascent offers a non-cosigned option for borrowers without credit history, pricing the risk through school, major, and GPA rather than FICO alone. SoFi includes membership benefits like career coaching and unemployment protection alongside its loans, though those benefits are worth evaluating separately from the loan rate itself.
For current rate comparisons across these lenders, the private student loan rates page is updated regularly with live offerings.
Credit Unions Are Often Overlooked
Credit unions deserve more attention than they get in the student loan conversation. Navy Federal Credit Union, PenFed, and DCU all offer private student loans to members, and credit union rates are frequently lower than bank equivalents because credit unions are not-for-profit and return earnings to members through better rates. The catch is membership eligibility, Navy Federal requires a military or family connection, PenFed has broader eligibility, and DCU is open to anyone who joins a partner association for a nominal fee.
LendKey operates as a marketplace that connects borrowers with credit union and community bank lenders through a single application interface. If you’re not already a credit union member but want access to that pricing tier, LendKey is a reasonable starting point.
Cosigner Considerations
Most undergraduate private student loan rates assume a cosigner with strong credit. Without one, you’re either paying a higher rate or facing denial. The advertised “as low as” rates at most lenders, including Sallie Mae and College Ave, assume a cosigner with a FICO above 750 and a debt-to-income ratio well below 20%. The footnotes say so. Most undergraduates don’t have an established credit file at all, which means a parent or other creditworthy adult cosigning is often the difference between a 7% rate and a 13% rate, or between approval and rejection.
Cosigning is a real commitment. The cosigner is equally liable for the loan. If you miss payments, their credit suffers. Some lenders offer cosigner release after a specified number of on-time payments, typically 24 to 48 months, but the bar is usually high and the application process is not automatic. If releasing the cosigner is important to your family, check whether the lender offers that option before you apply, and read the conditions in the loan agreement rather than the marketing page.
The Right Order, and Why It Saves Money
Federal loans come with income-driven repayment plans that cap monthly payments at a percentage of your discretionary income. They qualify for Public Service Loan Forgiveness and income-driven forgiveness programs. They offer deferment and forbearance with broader eligibility than most private lenders. And they don’t require a credit check for undergraduate borrowers or a cosigner.
Private loans offer none of that by default. Some private lenders have their own forbearance and deferment options, but they are narrower, harder to qualify for, and not guaranteed. A borrower who maxes private loans first and exhausts federal options last is trading long-term flexibility for short-term convenience.
The practical rule: take every dollar of subsidized federal loans you’re offered, then unsubsidized federal loans up to your annual limit, then exhaust grants and work-study, and only then turn to private loans for the remaining gap. If you reach the private loan step, you’re looking for the best rate available on what you actually need, not on the total cost of attendance. Borrow the minimum. The repayment math is friendlier that way.
