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When financing higher education, understanding the differences between Direct Subsidized and Direct Unsubsidized Loans is essential. Both are federal student loans offered by the U.S. Department of Education, but they vary in terms of eligibility, interest accrual, and repayment responsibilities.

Keep reading to learn the similarities and differences between subsidized and unsubsidized loans, plus additional ways to pay for college.

What Is a Direct Subsidized Loan?

Direct Subsidized Loans are available only to undergraduate students, and they are awarded based on financial need.

The U.S. government pays the interest on Direct Subsidized Loans as long as the student is enrolled in classes at least half-time. The accrued interest is also covered during the six-month grace period after the student leaves school or graduates and if the student’s loan is in a period of deferment.

The federal help is meant to give students a chance to get on their feet financially before the debt starts accruing interest they’ll have to pay.

What Is a Direct Unsubsidized Loan?

A Direct Unsubsidized Loan is a federal student loan available to eligible undergraduate, graduate, and professional students that accrues interest from the time it is disbursed, regardless of financial need.

Like subsidized loans, repayment doesn’t begin until six months after the student graduates, drops below half-time, or leaves school, but the interest will still accrue during this time.

Unsubsidized student loans can cost more in the long run than subsidized loans because of the accruing interest.

Differences Between Subsidized and Unsubsidized Loans

Subsidized and unsubsidized student loans both can help pay for college, but they vary in terms of eligibility, interest accrual, and long-term cost. Knowing how each works can help you make smarter borrowing decisions. Differences between the two include:

•   Subsidized loans are only available to undergraduate students who demonstrate financial need.

•   Unsubsidized loans are available to both undergraduate and graduate students, regardless of financial need.

•   With subsidized loans, the government pays the interest while you’re in school at least half-time, during the grace period, and deferment.

•   Subsidized loans typically cost less over time due to the government covering interest during specific periods.

•   Annual and aggregate loan limits are higher for Direct Unsubsidized Loans than for Direct Subsidized Loans.

Similarities Between Subsidized and Unsubsidized Loans

While there are notable differences between subsidized and unsubsidized student loans, these two federal loan types also share several important similarities. Similarities include:

•   Both loans are part of the federal Direct Loan Program and are issued by the U.S. Department of Education.

•   Eligibility for both loan types requires students to complete and submit the Free Application for Federal Student Aid (FAFSA®).
Subsidized and unsubsidized loans come with fixed interest rates set annually by the federal government.

•   Both loan types offer a six-month grace period after graduation, leaving school, or dropping below half-time enrollment before repayment begins.

•   Borrowers of either loan may qualify for federal repayment options, deferment, forbearance, and certain loan forgiveness programs.

For the 2025-2026 school year, the federal student loan interest rate is 6.39% for Direct Subsidized and Unsubsidized Loans for undergraduates, 7.94% for Direct Unsubsidized Loans for graduate and professional students, and 8.94% for Direct PLUS loans for parents and graduate or professional students.

How Do I Get a Federal Student Loan?

The process to receive federal financial aid begins when the student completes the Free Application for Federal Student Aid (FAFSA), which must be filled out annually. The form asks for information about the student (name, date of birth, address, financial information from tax forms and bank statements). If the student is a dependent, there will be similar questions about support from home that will help determine financial need.

Borrowers who don’t demonstrate enough need may not qualify for subsidized loans. They can, however, qualify for unsubsidized student loans, scholarships, grants, and work-study.

Based on the results of the FAFSA, the schools the student listed on the application will send a financial aid offer to the student, and the school will explain how to accept all or part of the federal financing.

The FAFSA deadline is typically June 30, but each college and state may have its own deadlines.

Recommended: Navigating Your Financial Aid Package

What if Federal Loans Aren’t Enough?

If a student doesn’t qualify for federal student loans — or if more funding is required — there are other options for financing a college education.

Private student loans can help fill the gaps if federal loans don’t cover all the costs of attending school. These loans are offered by private lenders, including banks, credit unions, and online financial institutions, so the terms vary from one to the next — and the qualifications and terms will be different from federal loans.

Private student loans can have fixed or variable interest rates, and some lenders offer more competitive rates than others. (All federal loans have fixed interest rates.)

A borrower’s credit rating and income, among other factors, will generally be used to determine the interest rate and how much may be borrowed. Those who need help qualifying could consider tapping a trusted student loan cosigner.

Repayment terms on private loans also differ from lender to lender — and they’re generally less forgiving than the repayment plans offered for federal student loans. It’s important to understand what’s expected before signing for any type of loan.

Recommended: Private Student Loans vs Federal Student Loans

The Takeaway

Subsidized federal student loans do not accrue interest while the borrower is attending school at least half-time. Unsubsidized federal student loans lack this benefit, and borrowers are responsible for interest that accrues as soon as the loan is disbursed. Both loans offer federal benefits and protections, such as income-driven repayment plans and student loan deferment.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is the main difference between Direct Subsidized and Unsubsidized Loans?

The primary difference lies in interest accrual. With Direct Subsidized Loans, the federal government pays the interest while the student is in school at least half-time, during the six-month grace period after leaving school, and during deferment periods. In contrast, Direct Unsubsidized Loans accrue interest from the time the loan is disbursed, and the borrower is responsible for all interest, including during in-school, grace, and deferment periods.

Do both loan types require repayment to begin at the same time?

Yes, repayment for both Direct Subsidized and Direct Unsubsidized Loans begins six months after the borrower graduates, leaves school, or drops below half-time enrollment. However, interest accrues differently during this period: subsidized loans do not accrue interest, while unsubsidized loans do.

Are there loan limits for Direct Subsidized and Unsubsidized Loans?

Yes, both loan types have annual and aggregate limits, which vary based on the student’s year in school and dependency status. Notably, the loan limits for Direct Unsubsidized Loans are generally higher than those for Direct Subsidized Loans.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-050

Paying for college is a significant financial investment, and many families want to ensure they’re protected in case something unexpected disrupts a student’s education. That’s where tuition insurance comes in.

Tuition insurance is a type of coverage that can help reimburse tuition costs if a student has to withdraw from school due to serious illness, injury, or other covered circumstances. But is it really necessary? This article explores what tuition insurance is, what it covers, how much it costs, and whether it’s worth considering for your family’s situation.

What Is Tuition Insurance?

Just as you have health insurance to cover costs associated with unexpected health issues, you can get tuition insurance to cover college tuition costs in the event of unexpected health issues that prevent your student from attending.

Also called tuition refund insurance, it can recoup some or all of what you’ve paid in tuition if your student experiences a serious injury or illness that prevents college attendance.

What Does Tuition Insurance Cover?

Generally, tuition insurance covers:

•   Serious sickness

•   Injury

•   Mental health conditions, including anxiety and depression

•   Death of the student or person paying tuition

You’ll need to read the fine print to find out what qualifying medical events are, as some policies will list specific illnesses, such as mononucleosis.

Imagine a pandemic sweeping the land (wild thought, huh?). Tuition insurance will not cover tuition if a college or university has to close or if your student simply isn’t comfortable attending class in person. However, if your student contracts the disease and is unable to attend classes as a result, you may be eligible for a partial refund of tuition for that semester.

To file a claim, the student must withdraw from school and a medical professional must document that withdrawal was necessary. The process can vary by policy, though.

What Does Tuition Insurance Not Cover?

It’s important to know what tuition insurance does not cover, as well. If your student leaves college for academic reasons or is on disciplinary probation, you will not be reimbursed for tuition.

Some pre-existing conditions may not be covered, so if your student has a medical condition, make sure it is covered before buying the policy.

Tuition insurance may also not cover participating in professional sports or extreme sports (like bungee jumping), participating in a riot, drug abuse, suicide, or self-inflicted injury.

Who Should Consider Tuition Insurance?

Some students or parents paying for tuition might be better candidates for college tuition insurance than others.

For students with pre-existing conditions that can be covered by a policy, it can be a good idea to purchase coverage, especially if it’s a condition that is known to keep the student bedridden or otherwise unable to function for weeks or months at a time. The reimbursed tuition money could be put toward medical bills or a future semester in college.

If you have more than one child in college, a tuition insurance policy could help you recoup costs for a student experiencing an issue that you could then put toward other college expenses.

And if the school your student is attending is very expensive, an insurance policy may allow you to relax a bit more in the event that something happens.

Recommended: What Is the Cost of Attendance in College?

Cost of Tuition Insurance

Part of determining whether college tuition insurance is worthwhile is understanding the policy cost vs. possible reimbursement, as well as tuition costs.

While a select few schools offer free tuition, most have significant price tags. As of 2025, the average costs of tuition for:

•   In-state tuition for a four-year public university: $9,750

•   Out-of-state tuition for four-year public university: $28,386

•   Private nonprofit four-year institution: $37,421

These numbers add up over four (or more!) years, so it’s understandable that paying for an insurance policy might make sense. But, how much is tuition insurance?

Plans vary in pricing and features, but generally, you can expect to pay about 1% of the cost of tuition. Some cover other expenses like room and board, while others do not.

Buying a Tuition Insurance Policy

Currently, there are two primary providers of tuition insurance: GradGuard and A.W.G. Dewar. Some schools may work with a private insurance company, so start by asking the registrar’s office if the college has a partner for tuition insurance.

Of course, the most affordable and comprehensive coverage can be obtained by going directly through the school, if your school offers it. Make sure to ask your school about tuition insurance prior to seeking an outside provider.

To enroll in a policy, you’ll be asked about your student’s school and costs for a semester of tuition. You’ll then be given a quote, and if you want the coverage, you can purchase from there by adding a few more personal details and inputting your payment information. You’ll pay your monthly premium, just as you do with auto or health insurance.

Reading the Fine Print

Before purchasing the policy, it’s best to read the fine print. The last thing you want is to purchase a policy and file a claim, expecting to be fully reimbursed, only to find out the condition you’re filing for isn’t covered.

For example, GradGuard’s fine print discusses a pre-existing medical condition exclusion waiver. It states that pre-existing medical conditions are covered when the insured student does not have symptoms of the condition on the policy purchase date and was medically able to attend school, or if the student was covered by a similar policy by the same company within four months of the effective date of the current policy.

Other fine print items to note are whether a doctor or licensed mental health professional needs to diagnose the student with the medical condition to qualify for reimbursement, the effective date of the policy, and how to prove your loss. Not all policies will fully reimburse your tuition or other costs, so find out how much you may be eligible to be refunded before purchasing a policy.

How to File a Claim

Each insurance company has its own process for filing a claim. Be sure to read through the process, as one incorrect step could cause your claim to be denied.

You’ll need documentation for the expenses you want to claim from the college or university. You may need the registrar’s office to verify on paper that your student has withdrawn for the semester, as well as documents showing what you have paid in tuition and expenses.

You may also need a written order from your student’s doctor or mental health professional stating that your child is unable to attend school due to medical reasons. For mental health issues, hospitalization of 24 to 48 hours may be required.

Alternatives to Tuition Insurance

While tuition insurance can come in handy if medical conditions or injury force a student to withdraw, the college might offer full or partial reimbursement without insurance.

Policies vary from one school to another, so inquire with the college or university before assuming you can get expenses refunded.

Some schools will refund tuition, but only during the first five weeks of a semester. Others won’t reimburse tuition but will refund some or all of room and board expenses if students withdraw.

Prior to making a decision on whether or not tuition insurance is right for you, speak with your child’s college directly so review your options.

Is Tuition Insurance Right for You?

The bottom line: If you don’t like taking risks with your money and are concerned that your student might have a situation that results in withdrawal from school for one or more semesters, tuition insurance could be a worthwhile investment. It’s a low expense compared to tuition, so it could be well worth it should you end up filing a claim.

If your student has a pre-existing condition that would be covered, insurance could mitigate your risk of losing money should that medical condition cause a need to leave school. On the other hand, not much is covered in terms of pre-existing conditions or activities your child might be involved in, such as professional sports. In these cases, the policy would be moot if the condition isn’t covered when you file a claim.

If a student withdraws and not all costs are covered or if no policy is in place, a private student loan could be a solution to fill the financial gap. Private student loans can typically be used for tuition, books, room and board, transportation, and other college-related expenses.

The Takeaway

Tuition insurance can serve as a valuable safety net for families concerned about the financial risks associated with unexpected student withdrawals due to serious health issues. While it may not be necessary for everyone, it offers peace of mind for those with higher tuition costs, limited school refund policies, or students with pre-existing medical conditions.
If you’re wondering how to pay for college, you can rely on cash savings, scholarships, grants, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is tuition insurance and how does it work?

Tuition insurance, also known as tuition refund insurance, is a policy that can reimburse some or all of your college tuition if a student must withdraw due to serious illness, injury, or mental health conditions. It acts as a financial safeguard against unexpected health issues that prevent attendance.

What does tuition insurance typically cover?

Generally, tuition insurance covers withdrawals due to serious sickness, injury, mental health conditions like anxiety and depression, or the death of the student or tuition payer. However, coverage specifics can vary, so it’s essential to review the policy details.

What situations are not covered by tuition insurance?

Tuition insurance usually does not cover withdrawals for academic reasons, disciplinary actions, or pre-existing conditions unless specified. It also excludes situations like participating in extreme sports, drug abuse, suicide, or self-inflicted injuries.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-045

Paying for college can be a major financial challenge, but tuition payment plans offer a way to make the cost more manageable. These plans, often referred to as tuition installment plans, allow students and families to break up large tuition bills into smaller, more affordable monthly payments.

Unlike student loans, they typically don’t charge interest, though they may include small enrollment or administrative fees. In this article, we’ll explore what college tuition payment plans are, how they work, their benefits and drawbacks, and how to decide if one is the right choice for your financial situation.

What Is a College Tuition Payment Plan?

Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans — also known as tuition installment plans or deferred payment plans — allow students and their families to spread out the cost of tuition over a period of time.

Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.

While you’ll generally have to start making payments right away, schools frequently offer the option to spread payments into monthly installments. Some also offer plans that break the payment into a few equal payments throughout the semester.

How Do Payment Plans Work?

Some colleges and schools run their own tuition payment plans. Others use an outside service to administer the plan.

Typically, these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included. The cost of things like textbooks and school supplies are not usually included in these plans.

Many tuition payment plans require an enrollment fee, which may run around $50 to $100, although it could be lower. These plans don’t usually charge interest, which can make them less expensive than taking out a student loan, as long as you are able to make the monthly payments. There generally isn’t a credit check with tuition payment plans.

What Types of Schools Offer Payment Plans?

Many schools offer some sort of tuition payment plan, including college and universities, graduate schools, community colleges, and trade schools.

Colleges and Universities

Tuition payment plans are offered at most, though not all, colleges and universities. Check your school’s website for details on available installment plans and see if there’s one that fits your needs and budget.

Graduate Schools

Many graduate programs offer payment plans. Enrollment dates can vary, so contact your program to find you when you’ll need to sign up.

Community Colleges

Community colleges typically offer payment plans for students and their families who are unable to pay costs upfront. Similar to plans at other types of schools, installment plans at community colleges may only cover certain costs, such as tuition and fees.

Trade Schools

Trade school tuition can cost $15,000, on average. Some schools may offer a payment plan so students can pay the tuition and fees in installments.

What if My School Doesn’t Offer a Payment Plan?

If your preferred school doesn’t offer a payment plan, you can explore independent plans offered through private organizations. Your school’s financial aid office may be able to provide referrals.

Of course, even with a payment plan, the burden of tuition can still be too high for some students and their parents. Consider some of the following options when planning to pay for college tuition. While these ideas alone might not be enough to help you cover the full cost of tuition, a combination of a few could do the trick.

Federal Aid

Federal aid for college encompasses grants, scholarships, federal student loans, and work-study. To apply, students must complete the Free Application for Federal Student Aid (FAFSA®) each year.

The schools you apply to will use this information to determine how much aid you receive. You’ll typically receive an award letter detailing what types of federal aid you’ve qualified for and the amounts.

Federal Student Loans

Federal student loans can be either subsidized or unsubsidized. Subsidized loans are awarded based on need. The Department of Education covers the interest that accrues on these loans while you are in school at least part-time, during the grace period after leaving school, and during periods of deferment or forbearance.

Unsubsidized federal loans are awarded independent of need. Borrowers are responsible for paying the interest that accrues on these loans while they are in school and during periods of deferment.

Payments are not required on either unsubsidized or subsidized loans while you are actively enrolled more than part-time in school.

There are also PLUS loans available to parents who are interested in borrowing a loan to help their child pay for college.

Work-Study

The Federal Work-Study Program provides jobs for undergraduate and graduate students who demonstrate financial need. The amount of work-study you receive will depend on factors like when you applied, your level of determined financial need, and the amount of funding available at your school.

The money earned for work-study won’t count against you when you fill out the FAFSA, so it shouldn’t jeopardize future financial aid awards. Each time you fill out the FAFSA, it’s worth indicating that you’re still interested in receiving work-study as part of your financial aid award (that is, if you are still interested).

And it’s important to remember that your financial aid award may change from year to year, depending on your and your family’s circumstances.

Scholarships and Grants

Scholarships and grants don’t typically have to be repaid, which makes them one of the best options for students trying to pay for school. Some scholarships and grants are awarded by schools based on the information you provided in the FAFSA, but there are scholarships and grants available that aren’t based on financial need.

Taking some time to comb through online scholarship search tools could prove helpful. Each scholarship will have different application requirements. Some might require an essay or additional supplementary materials, but the effort could be worth it if you’re able to fund a portion of your tuition costs.

Private Student Loans

Sometimes federal aid, scholarships, and your savings aren’t enough to cover the full cost of tuition. In those cases, private student loans could be an option. Unlike federal student loans, which are offered by the government, private student loans are offered by banks, credit unions, or other private lenders.

The private student loan application process will vary slightly based on lender policies, but will almost always require a credit check. Lenders will review your credit score and financial history as they determine how much money they are willing to lend to you.

In some cases, students might need the help of a cosigner to take out a private student loan. This could be the case if they have little to no credit history.

Some parents may also be interested in taking out a private loan to help their child pay for their education.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

Tuition payment plans, which extend the payment for college tuition over a fixed period of time, can be helpful for parents and students as they navigate how they’ll pay for the cost of education. Spreading tuition payments over the semester or year can help make them more manageable. Check if your preferred school offers a tuition payment plan. Many do.

Sometimes, the burden of tuition is still too high, even with a payment plan. Scholarships and grants, work-study, and federal aid can help you cover the cost of tuition. If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.

FAQ

Are college tuition payment plans the same thing as tuition installment plans?

Yes, college tuition payment plans and tuition installment plans refer to the same concept — spreading tuition payments over several months instead of paying a lump sum upfront.

Do college tuition payment plans cover all school-related costs?

Typically, payment plans only cover tuition and fees. This means you may be responsible for the cost of books, supplies, housing, food, and transportation. Check with your preferred school to find out what its plan covers.

Do college tuition payment plans charge interest?

College tuition payment plans typically do not charge interest. However, they may include enrollment fees or administrative charges, which vary by institution. These plans allow families to spread tuition payments over several months, making costs more manageable without accruing interest like traditional loans—though late payments may incur penalties.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-046

With the rising price of tuition, fees, and room and board at four-year public colleges and private nonprofit institutions, more students in all income brackets have been taking out student loans.

If you’re wondering where to get a student loan for college, you have two options. The first is getting a federal student loan through the government. Federal student loans account for more than 93% of all student loan debt. The second option is a private student loan, which is given by a bank, credit union, or online lender. Private student loans are not based on need, but rather your college’s cost of attendance, your credit profile, and your income (or your cosigner’s income).

Keep reading for more on where to get a student loan, including both federal student loans and private student loans.

Prioritizing a Plan

When creating a plan to fund college education, it’s wise to first explore any avenues for free money in the form of grants and scholarships.

By taking a look at the remaining balance after any free money has been found, exploring federal loans can be a smart next step. They come with income-based repayment options and the ability to request loan forgiveness under some circumstances. There are also work-study programs that can help students earn money while attending college.

If all needs are not covered, then there are private student loans to consider, along with Direct PLUS Loans that parents can apply for to get funds for their children.

After that, some people may seek out personal loans to cover living expenses while in school and/or emergency loans from the college.

Here are more specifics about these options.

Where to Get a Federal Student Loan

To obtain any kind of federal student loan, a student must first fill out the Free Application for Federal Student Aid, commonly called the FAFSA®.

After filling out this form, a student will have insights into what federal funding is available for them, along with work-study options. More specifically, each school that a student applies to can send a financial aid offer letter, which includes information about how to apply for student loans that they qualify for.

Two broad types of federal loans are:

•   Direct subsidized loans: Direct Subsidized Loans are for undergraduates that demonstrate financial need. With this loan, the U.S. Department of Education pays the interest while the student is enrolled at least half-time, during the grace period after leaving school, and during any deferment periods.

•   Direct unsubsidized loans: Direct Unsubsidized Loans are available for undergraduate students, as well as graduate and professional ones, that do not demonstrate financial need. Interest begins accruing right away.

Where to Get a Private Student Loan

A variety of financial institutions offer private student loans and have their own criteria for qualification. Some allow students to apply online and can give quick responses, while others go a more traditional route with in-person applications.

Private lenders will typically review a student’s income, plus that of any cosigner, along with credit histories and more to make lending decisions. A lender might grant a private student loan to someone whose credit isn’t stellar, but charge a higher interest rate.

When applying for a private student loan, it’s important to understand the loan terms before signing the note. This includes the interest rate and whether the rate is fixed (staying the same over the life of the loan, with the principal and interest payments also staying the same) or variable.

Pros of Private Student Loans

Benefits of private student loans can include the following:

•   They can bridge the gap between what is owed after federal student loans are applied to the balance and what is needed to attend college.

•   Students can apply for them any time of the year, without the strict deadlines associated with federal loans.

•   Borrowers may have more choices in interest rates and terms.

•   The loans may not include origination fees or prepayment fees, although that isn’t universally true.

Cons of Private Student Loans

Potential cons can include these:

•   It isn’t unusual for a private lender to require a cosigner because college students often don’t have enough income to qualify or have established a good enough credit profile to get the loan on their own.

•   Students who are considered a higher credit risk may pay more in interest.

•   Private student loans don’t come with many of the benefits associated with federal loans, such as forgiveness programs and income-based repayment plans.

•   Students may borrow more than they can ultimately afford, and these loans are typically not dischargeable in bankruptcy proceedings.

Recommended: A Complete Guide to Private Student Loans

Other Types of Loans

In addition to federal and private student loans, students and their families may consider other borrowing options to cover educational expenses.

Parent PLUS Loans

Students and parents can consider the Parent PLUS Loan, in which parents can apply for federal funding to help their children attend college.

Eligibility for a Parent PLUS Loan isn’t based on financial need, but credit is checked. If applicants have a credit history that’s considered “adverse,” they “must meet additional requirements to qualify.”

According to the Federal Student Aid office, adverse credit can include:

•   Having accounts that, in total, have an outstanding balance of more than $2,085 and are at least 90 days delinquent.

•   A default or a bankruptcy discharge during the previous five years.

•   Involvement in a foreclosure, repossession, or tax lien situation in the previous five years.

•   Write-off of federal student loan debt or wage garnishment during the past five years.

Qualifying parents of a dependent undergraduate student can receive funding through this loan program to cover education-related costs that are not covered by other financial aid.

Personal Loans

It’s also possible to apply for personal loans from financial institutions to cover living expenses during college or to address an emergency. There are downsides to this, though, including:

•   Interest rates will likely be higher than student loans, along with shorter payoff periods (which means principal and interest payments can be higher).

•   There isn’t typically a grace period, which means repayment starts right away.

•   These loans don’t come with deferments or forbearance, as can be available through federal student loans.

Emergency Loans

In an emergency, a student might want to reach out to the college financial aid center to see if the school offers emergency loans for those in need. These loans would not typically be large, perhaps $1,000 to $1,500, but might be enough to address a dire situation.

Each college has its own guidelines, so check them out carefully. Some charge interest; others may not. Some may charge a service fee; others may not. As with personal loans, repayment may start immediately, so factor that into budget planning.

The Takeaway

When exploring options to finance a college education, it’s essential to understand the various student loan avenues available and where to get them. Federal student loans, accessible through the Free Application for Federal Student Aid (FAFSA), often offer lower interest rates and flexible repayment plans. Private student loans, provided by banks, credit unions, or online lenders, can help bridge funding gaps but may come with higher interest rates and less lenient repayment terms.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What are the main sources for obtaining a student loan?

The two primary sources for student loans are federal student loans provided by the government and private student loans offered by banks, credit unions, and online lenders. Federal loans account for over 93% of student loan debt and are typically based on financial need, while private loans depend on creditworthiness and income.

How do I apply for a federal student loan?

To apply for a federal student loan, you must complete the Free Application for Federal Student Aid (FAFSA). After submission, you’ll receive information on the types and amounts of federal aid you qualify for, including work-study options. Each school you apply to will send a financial aid offer letter detailing your eligible loans.

When should I consider private student loans?

Private student loans can be considered after exhausting federal aid options. They can bridge the gap between the remaining cost of attendance and the amount covered by federal loans. Private loans are based on creditworthiness and may require a cosigner. They often lack the benefits of federal loans, such as income-driven repayment plans and loan forgiveness programs.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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