How to Navigate the Student Loan Process: A Comprehensive Guide

Whether you're a student starting your higher education journey or a parent supporting your child through the process, clear and practical guidance on student loans can mean the difference between overpaying for education or saving thousands of dollars. Fortunately, there are plenty of strategies for paying off student loans faster and finding the best interest rates for private student loans. 

For example, did you know your local credit union is an excellent resource for researching student loan options and repayment plans? Credit union student loans also offer some of the lowest private student loan rates around. Not to mention your local credit union has financial advisors who are happy to help. 

But first, let's take a look at how the student loan system works so you can navigate this financial terrain with confidence and ease.

What Are Student Loans?

Student loans are borrowed money that can help pay for a student's post-secondary education and expenses, such as tuition, room & board, textbooks, supplies, and other necessities. Like a traditional loan, the lump sum is granted with the expectation to be paid back with interest. However, unlike other types of loans, student loans often have lower fixed interest rates, only require repayment after graduation, and could even have options for loan deferment or forgiveness. 

The federal government, banks, credit unions, and other private financial institutions can issue student loans. While all student loans are designed to help students pay for education, different issuers have different application processes, terms, and payment options.

Types of Student Loans and Differences Between Them

The two main types of student loans are federal and private. They each come with their own application processes, terms, and benefits. Here’s how they compare. 

Federal student loans

The federal government funds federal student loans. You can apply for them through the Federal Student Aid FAFSA form, which will tell you the types of student loans and other financial aid you qualify for. 

The four federal student loan types include: 

  1. direct subsidized
  2. unsubsidized 
  3. PLUS 
  4. consolidation loans

The federal government pays part of the interest on subsidized loans but not on unsubsidized. PLUS loans are used to cover additional expenses, and consolidation loans are used to combine payments. 

Federal loans have a low fixed interest rate and don't require a credit check or co-signer. In addition, students don't have to begin repayment until after graduation, and deferment, flexible payment, and forgiveness options could be available under certain circumstances. 

Private student loans

Financial institutions like your local credit union issue private student loans. You can apply for them online or in person. While private loans are unsubsidized, a wider variety of options are available, so be sure you’re finding the best interest rates for private student loans by shopping around. 

For example, some private student loans are deferred until after graduation, while others require repayment while still in school. Additionally, private loans will vary in terms and could have fixed or variable rates and require a credit check or co-signer. 

Benefits of private student loans include rewards for good credit history, higher borrowing limits, a statute of limitations for default, and an alternative to federal financial aid.

Eligibility and Applying for Student Loans

Know your eligibility and the application process before starting your student loan journey. Here are a few prerequisites to keep in mind: 

Understanding Loan Repayment

Ensure you understand student loan repayment and the options available before taking out a student loan. That way, you’re more likely to take advantage of strategies for paying off student loans faster. Here are a few factors to consider: 

Strategies for Managing Student Loan Debt

Defaulting on a loan could inhibit your future ability to rent an apartment, purchase a car, or buy a home. So it is important to manage student loan debt and make timely payments. Here are a few strategies to make it easier:

Credit Unions and Student Loans

There are many student loan options out there, including ones from the federal government, banks, and your local credit union. Credit union student loans are an excellent option for students looking to supplement federal financial aid, consolidate debt, or pay for college in full. 

Finding the best interest rates for private student loans is essential. Private student loans may even have lower rates than federal loans based on applicant credit. Credit unions, in particular, because they are not-for-profit organizations, typically have lower interest rates than corporate banks. In addition, credit union student loans frequently come with flexible terms, discount incentives, and financial advice from a trusted professional.

Further Resources on Student Loan Help

Need additional study resources to map out your student loan application and payment plan? Check out these websites:

Ace Your Student Loan Payment Plan 

Now that you have the insight, tools, and know-how, you can confidently navigate your student loan applications and ace your repayment plan. Get more understanding of loan terms and consolidation plans from your local credit union team. Use our Credit Union Locator to get started.

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Did You Know?

Student loan interest rates can affect how much you pay over the life of your loan. However, because credit unions are not-for-profit organizations, they typically offer lower interest rates than large corporate banks — making it easier to repay your loan!

Find the right Credit Union for you

There are more than 5000 credit unions to choose from across the U.S.