Higher education is an important investment in your future, but the costs are rising all the time. Between tuition fees, accommodation, course materials and daily expenses, budgeting can quickly become a challenge. That’s where student loans come in, as a suitable funding solution to make your academic ambitions a reality.
Whether you want to get into a top school, fund a masters course abroad or simply cover the costs of student life, the right loan can make all the difference. In this article, we’ll help you understand and choose the right student loan for your needs.
What is a student loan ?
A student loan is a credit facility specifically designed to finance higher education-related expenses such as tuition fees, accommodation, study materials or even projects abroad. Unlike conventional loans, they offer conditions tailored to young, often self-employed profiles, with attractive interest rates, flexible repayment periods and sometimes even deferred repayment until the end of studies.
Why take out a student loan ?
Taking out a student loan can be an essential solution to financing higher education. There are several reasons for this. Firstly, it can help you meet the high cost of your studies. Higher education can be a significant investment, especially for private schools, specialised masters programmes or international programmes. A student loan is therefore a way of covering these costs without compromising your academic progress.
What’s more, by taking out a student loan, you can benefit from deferred repayment. In fact, many student loans offer deferred repayment, which means you don’t have to start repaying the loan immediately. This gives you time to complete your studies and enter the job market before you have to worry about repayments.
Finally, student loans can be used to finance study-related expenses. As well as tuition fees, they can cover essential needs such as buying a computer, paying a deposit for a flat or transport costs. It’s a quick and effective way to ease the financial pressures of studying.
Who can and cannot take out student loans ?
There are several criteria to consider when applying for a student loan. In general, to qualify for a loan as a student, you must be able to prove that you are enrolled at an accredited institution of higher education. Some loans require the student to provide a financial guarantor or surety.
Another consideration is your credit history. This means that before you take out a loan, you must ensure that you have complied with all the terms and conditions of your previous loans, if you have had any, and that you have not exceeded the loan limit available to a student. Although some banks and institutions offer loans without a guarantor, others require one.
However, you won’t be able to get a student loan if you’re still in high school, if you’re bankrupt, if you owe $500 or more on a student loan and you’re at least one year behind on any part of that amount, or if the length of your course is less than 32 weeks and represents less than 0.25 EFTS. However, you’ll need to check the terms and conditions of the loans with the banks that offer them.
The different types of loans available for students
If you need to finance your education, it’s important to understand the different options available to you. The two main solutions are federal student loans and private student loans. Each offers specific features that can meet your financial needs.
Federal student loans
There are many ways to finance a university education, and federal student loans are among the most popular. They are designed to offer flexible repayment terms and generally have low interest rates. Here are some subtypes of federal student loans.
Direct Subsidised Loans (DSL)
Subsidised Direct Loans are for students with financial need. The advantage of these loans is that they are interest-free while you are in school, during the 6-month grace period after graduation, and during any deferment period. To apply, complete the FAFSA form and you’ll receive an award letter.
Direct Unsubsidised Loans (DUS)
Direct Unsubsidised Loans are for undergraduate, graduate and professional students. Unlike subsidised loans, you don’t have to demonstrate financial need, but interest begins to accrue as soon as the loan is disbursed. This means that interest accrues while you are in school, after you graduate, and even during periods of deferment or forbearance.
Direct PLUS Loans
Direct PLUS Loans are designed to help graduate and professional students and parents of dependent undergraduate students pay for tuition. These loans, also known as Graduate PLUS and Parent PLUS, have higher interest rates and fees than Direct Subsidized and Unsubsidized Loans, and unlike other federal student loans, Parent PLUS loans are made by parents. While the student may be able to make the payments, the parents are legally and financially responsible for repaying the entire loan. This only appears on the student’s account.
Private loans for students
In addition to government loans, there are private loans available to students. This is an option if you’ve exhausted the possibilities of scholarships and other grants and they still don’t cover all your needs. These loans are usually offered by banks or other financial institutions.
Undergraduate loans
As the name suggests, undergraduate student loans are loans for undergraduate (bachelor level) students. These private loans almost always require a co-signer, as undergraduates generally haven’t had time to develop a credit history, and have higher interest rates than graduate student loans.
Graduate loans
Graduate loans are a specific option for law, business and medical students. Unlike undergraduate loans, graduates may not need to have a co-signer before taking out a graduate loan. They generally offer higher loan amounts, longer repayment periods and more favourable interest rates.
Parental loans
Parents can take out federal or private loans to help pay for their children’s education. A common federal option is the Parent PLUS Loan, which allows you to borrow up to the full cost of tuition minus any other financial aid you receive. This loan is subject to credit and enrolment requirements. However, parents can also research private student loans to compare interest rates and choose the most advantageous option.
Which student loan to choose?
While there’s no single rule for choosing the most ideal option, it’s fair to say that federal loans remain the first option to consider. However, it all depends on your finances, preferences and risk tolerance.
Federal loans
Subsidized direct loan
- Interest rate: 6.53% (2024-25).
- Repayment term: 10 years (standard).
- Eligibility: Reserved for undergraduate students with demonstrated financial need.
- Advantages : Interest is paid by the government while you are studying and during deferral periods.
No credit check. - Ideal for : Students from low-income families.
Unsubsidized direct loan
- Interest rate: 6.53% for undergraduates, 8.08% for graduates (2024-25).
- Repayment term: 10 years (standard).
- Eligibility: Open to all undergraduate and graduate students, regardless of financial need.
- Advantages :
Accessible to all eligible students.
No credit check. - Disadvantage: Interest accrues as soon as funds are released.
- Ideal for : Students who do not qualify for subsidized loans.
PLUS direct loan
- Interest rate: 9.08% (2024-25).
- Repayment term: 10 years (standard).
- Eligibility: Intended for graduates and parents of undergraduate students.
- Advantages :
Higher amounts to cover full tuition fees. - Disadvantage: Credit check required (minimum credit score).
- Ideal for: Graduate students who have exhausted their unsubsidized loans, or parents looking to finance their child’s education.
Private loans
- Interest rate: Approximately 4% to 18% (depending on credit profile).
- Repayment terms: 5 to 25 years (flexible).
- Eligibility :
Open to undergraduates, graduates and parents.
Need a good credit score and a stable income (or a co-signer). - Advantages :
Larger amounts than federal loans (up to full tuition).
Flexible repayment options. - Disadvantages :
Interest rates often higher than federal loans.
No postponement or cancellation programs in case of financial difficulties. - Ideal for :
Students who have reached the federal loan ceiling.
Borrowers with excellent credit or a strong co-signer.
Comparison table
| Criteria | Federal loans | Private loans |
| Interest rates | 6.53% to 9.08% (fixed) | 4% to 18% (variable or fixed) |
| Repayment terms | 10 years (standard) | 5 to 25 years (flexible) |
| Eligibility | U.S. citizens or permanent residents | Good credit and stable income required |
| Advantages | Fixed rates, no credit check, deferral options | Higher amounts, flexibility |
| Disadvantages | Maximum loan amounts | Higher rates, less protection |
| Ideal for | Low-income students, graduates, parents | Students with good credit or co-signers |
What type of loan should I choose?
Opt for a federal loan if :
- You’re an undergraduate with financial needs.
- You want to benefit from fixed rates and government protection (deferral, cancellation).
- You have no co-signer or a low credit score.
Opt for a private loan if :
- You’ve exhausted your federal loan options.
- You have excellent credit or a solid co-signer.
- You need larger amounts or a flexible repayment period
How do I apply for a Federal Student Loan?
Federal loans are administered by the US government and offer favourable terms. Here’s how to apply:
Step 1: Complete the FAFSA form
What is the FAFSA? The Free Application for Federal Student Aid (FAFSA) is the required form for applying for federal financial aid.
How to do it:
- Visit the official website: studentaid.gov.
- Create an FSA ID account.
- Complete the online form, providing information about your income, your parents’ income (if dependent) and your intended school.
Deadline: Apply from 1 October to maximise your chances of receiving funding.
Step 2: Receive your award offer
After submitting the FAFSA, you will receive a Student Aid Report (SAR) summarising your information.
Your school will send you a Financial Aid Offer detailing the loans, scholarships and grants you are eligible to receive.
Step 3: Accept the Federal Loan
- Loan selection: Select the type of federal loan you need (subsidised, unsubsidised or PLUS).
- Sign the Master Promissory Note (MPN): This document formalises your commitment to repay the loan.
- Introductory interview: Mandatory for new borrowers, it explains your rights and responsibilities.
Step 4: Receiving the funds
The funds are sent directly to your school, which uses them to pay your tuition fees. Any surplus will be returned to you to cover other expenses.
How do I apply for a private loan?
Private loans are offered by banks, credit unions or financial institutions. Here’s how to get one:
Step 1: Compare offers
- Criteria to compare: Interest rate (fixed or variable), fees, repayment period, deferment options.
- Useful tools: Use online comparison sites such as NerdWallet, Credible or LendKey.
Step 2: Check your eligibility
- Terms and conditions: have good credit (or a co-signer with good credit), proof of stable income or a solvent co-signer, be enrolled in an accredited educational institution.
- Documents required: Identification (passport, driving licence), proof of income (payslip, tax return), proof of school enrolment.
Step 3: Submit your application
- Online: Most banks allow you to apply directly on their website.
- Information to provide : Personal details (name, address, social security number), Details of your school and study programme and Financial information (income, debts).
Step 4: Accept the Loan Offer
- Review the offer: Check interest rates, fees and repayment terms.
- Sign the contract: Read the terms and conditions carefully before signing.
- Co-sign: If applicable, make sure your co-signer also signs.
Step 5: Receive funds
The funds are usually sent directly to your school, but some banks can transfer them to your personal account.
Stage comparison table
| Step | Federal loan | Private loan |
| Fill-in form | FAFSA | Online application to the bank |
| Eligibility | U.S. citizens or permanent residents | Good credit or co-signer required |
| Documents required | Financial information, SAR | ID, proof of income |
| Signature | Master Promissory Note (MPN) | Loan contract |
| Processing time | 3 to 5 working days | 1 to 2 weeks |
Tips to maximise your chances
- Apply early: Federal funding is limited, so submit your FAFSA as early as 1 October.
- Compare offers: For private loans, use online comparators to find the best rates.
- Improve your credit: If you decide to take out a private loan, a good credit score can lower your interest rate.
- Talk to a financial adviser: Your school or student union can help you navigate the process.
