student work loans

U.S. Department of Education

Biden-Harris Administration Announces Additional $4.9 Billion in Approved Student Debt Relief

The Biden-Harris Administration announced today the approval of $4.9 billion in additional student loan debt relief for 73,600 borrowers. These discharges are the result of fixes made by the Administration to income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF).

Today’s announcement brings the total loan forgiveness approved by the Biden-Harris Administration to $136.6 billion for more than 3.7 million Americans.

“The Biden-Harris Administration has worked relentlessly to fix our country's broken student loan system and address the needless hurdles and administrative inaccuracies that, in the past, kept borrowers from getting the student debt forgiveness they deserved," said U.S. Secretary of Education Miguel Cardona. "The nearly $5 billion in additional debt relief announced today will go to teachers, social workers, and other public servants whose service to our communities have earned them Public Service Loan Forgiveness, as well as borrowers qualifying for income-driven repayment forgiveness because their payments are for the first time being accurately accounted for. Thanks to President Biden's leadership, we're approving this loan forgiveness while moving full speed ahead in our efforts to deliver even greater debt relief, and help more borrowers get on a faster track to loan forgiveness under our new, affordable SAVE repayment plan."

The debt relief announced today is broken down into the following categories:

$1.7 billion for 29,700 borrowers through administrative adjustments to IDR payment counts that have brought borrowers closer to forgiveness and address longstanding concerns with the misuse of forbearance by loan servicers. Including today’s announcement, the Biden-Harris Administration has now approved $45.7 billion in IDR relief for 930,500 borrowers.

$3.2 billion for 43,900 borrowers through PSLF. This includes borrowers who have benefitted from the Biden-Harris Administration’s limited PSLF waiver as well as regulatory improvements made to the program by the Administration. Total relief through PSLF is now $56.7 billion for 793,400 borrowers since October 2021. Prior to the Biden-Harris Administration’s fixes to PSLF, only about 7,000 borrowers had ever received forgiveness.

“Today we are helping borrowers who were promised help with their loans, planned their lives around those promises, and earned forgiveness through years of payments.” said U.S. Under Secretary of Education James Kvaal. “The Biden-Harris Administration is not going to stop until we’ve helped all of those harmed by the broken student loan system.”

Continued debt relief for borrowers

The Biden-Harris Administration last week announced that the U.S. Department of Education (Department) is fast-tracking additional loan forgiveness through early implementation of the Saving on a Valuable Education (SAVE) Plan. Borrowers who originally took out $12,000 or less for college and are enrolled in the SAVE Plan will see forgiveness after as few as 10 years of payments. Those who are enrolled in SAVE and are eligible for early forgiveness will have their debts automatically cancelled starting next month, months ahead of schedule, with no action needed.

The Department began communications with borrowers who may be eligible but are not already enrolled in SAVE to encourage them to sign up. The Department is also working with its partners through the SAVE on Student Debt campaign to reach eligible borrowers and provide resources to sign up for SAVE.

Borrowers can find additional resources at StudentAid.gov and sign up for the SAVE plan at StudentAid.gov/save .

An unparalleled track record of borrower assistance

The Biden-Harris Administration has taken historic steps to reduce the burden of student debt and ensure that student loans are not a barrier to opportunity for students and families. The Administration secured the largest increase to Pell Grants in a decade and finalized new rules to protect borrowers from career programs that leave graduates with unaffordable debts or insufficient earnings. And, in the wake of the Supreme Court decision on the Administration's original student debt relief plan, the Administration continues its work to pursue an alternative path to debt relief through negotiated rulemaking under the Higher Education Act.

Beyond the relief under IDR and PSLF, the Biden-Harris Administration has also approved:

• $11.7 billion for almost 513,000 borrowers with a total and permanent disability.
• $22.5 billion for more than 1.3 million borrowers who were cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements.
• Tags: Student Debt Relief Press Releases

How Do I Find...?

• Student loans, forgiveness
• Higher Education Rulemaking
• College accreditation
• Every Student Succeeds Act (ESSA)
• 1098, tax forms

Information About...

• Elevating Teaching
• Early Learning
• Engage Every Student
• Unlocking Career Success
• Cybersecurity

Search press releases

Find by month.

• February 2024
• January 2024
• December 2023
• November 2023
• October 2023
• September 2023
• August 2023
• All Press Releases

Mobile Menu Overlay

The White House 1600 Pennsylvania Ave NW Washington, DC 20500

FACT SHEET: President   Biden Announces Student Loan Relief for Borrowers Who Need It   Most

A three-part plan delivers on President Biden’s promise to cancel $10,000 of student debt for low- to middle-income borrowers

President Biden believes that a post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. During the campaign, he promised to provide student debt relief. Today, the Biden Administration is following through on that promise and providing families breathing room as they prepare to start re-paying loans after the economic crisis brought on by the pandemic. Since 1980, the total cost of both four-year public and four-year private college has nearly tripled , even after accounting for inflation. Federal support has not kept up: Pell Grants once covered nearly 80 percent of the cost of a four-year public college degree for students from working families, but now only cover a third. That has left many students from low- and middle-income families with no choice but to borrow if they want to get a degree. According to a Department of Education analysis, the typical undergraduate student with loans now graduates with nearly $25,000 in debt. 

The skyrocketing cumulative federal student loan debt—$1.6 trillion and rising for more than 45 million borrowers—is a significant burden on America’s middle class. Middle-class borrowers struggle with high monthly payments and ballooning balances that make it harder for them to build wealth, like buying homes , putting away money for retirement , and starting small businesses . For the most vulnerable borrowers, the effects of debt are even more crushing. Nearly one-third of borrowers have debt but no degree, according to an analysis by the Department of Education of a recent cohort of undergraduates. Many of these students could not complete their degree because the cost of attendance was too high. About 16% of borrowers are in default – including nearly a third of senior citizens with student debt – which can result in the government garnishing a borrower’s wages or lowering a borrower’s credit score. The student debt burden also falls disproportionately on Black borrowers. Twenty years after first enrolling in school, the typical Black borrower who started college in the 1995-96 school year still owed 95% of their original student debt. Today, President Biden is announcing a three-part plan to provide more breathing room to America’s working families as they continue to recover from the strains associated with the COVID-19 pandemic . This plan offers targeted debt relief as part of a comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families. The President is announcing that the Department of Education will:   

• Provide targeted debt relief to address the financial harms of the pandemic, fulfilling the President’s campaign commitment. The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action. To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.
• Cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers. 
• Fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness. These improvements will build on temporary changes the Department of Education has already made to PSLF, under which more than 175,000 public servants have already had more than $10 billion in loan forgiveness approved.
• Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices. The President championed the largest increase to Pell Grants in over a decade and one of the largest one-time influxes to colleges and universities. To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free. Meanwhile, colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford. This Administration has already taken key steps to strengthen accountability, including in areas where the previous Administration weakened rules. The Department of Education is announcing new efforts to ensure student borrowers get value for their college costs.

Provide Targeted Debt Relief, Fulfilling the President’s Campaign Commitment To address the financial harms of the pandemic for low- and middle-income borrowers and avoid defaults as loan repayment restarts next year, the Department of Education will provide up to $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Nearly every Pell Grant recipient came from a family that made less than $60,000 a year, and Pell Grant recipients typically experience more challenges repaying their debt than other borrowers. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief.

The Pell Grant program is one of America’s most effective financial aid programs—but its value has been eroded over time. Pell Grant recipients are more than 60% of the borrower population. The Department of Education estimates that roughly 27 million borrowers will be eligible to receive up to $20,000 in relief, helping these borrowers meet their economic potential and avoid economic harm from the COVID-19 pandemic. Current students with loans are eligible for this debt relief. Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income. If all borrowers claim the relief they are entitled to, these actions will:

• Provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.
• Target relief dollars to low- and middle-income borrowers. The Department of Education estimates that, among borrowers who are no longer in school, nearly 90% of relief dollars will go to those earning less than $75,000 a year. No individual making more than $125,000 or household making more than $250,000 – the top 5% of incomes in the United States – will receive relief.
• Help borrowers of all ages. The Department of Education estimates that, among borrowers who are eligible for relief, 21% are 25 years and under and 44% are ages 26-39. More than a third are borrowers age 40 and up, including 5% of borrowers who are senior citizens.
• Advance racial equity. By targeting relief to borrowers with the highest economic need, the Administration’s actions are likely to help narrow the racial wealth gap. Black students are more likely to have to borrow for school and more likely to take out larger loans. Black borrowers are twice as likely to have received Pell Grants compared to their white peers. Other borrowers of color are also more likely than their peers to receive Pell Grants. That is why an Urban Institute study found that debt forgiveness programs targeting those who received Pell Grants while in college will advance racial equity.

The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year. Nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.   Thanks to the American Rescue Plan, this debt relief will not be treated as taxable income for the federal income tax purposes. To help ensure a smooth transition back to repayment, the Department of Education is extending the student loan pause a final time through December 31, 2022. No one with federally-held loans has had to pay a single dollar in loan payments since President Biden took office. Make the Student Loan System More Manageable for Current and Future Borrowers Fixing Existing Loan Repayment to Lower Monthly Payments The Administration is reforming student loan repayment plans so both current and future low- and middle-income borrowers will have smaller and more manageable monthly payments. The Department of Education has the authority to create income-driven repayment plans, which cap what borrowers pay each month based on a percentage of their discretionary income. Most of these plans cancel a borrower’s remaining debt once they make 20 years of monthly payments. But the existing versions of these plans are too complex and too limited. As a result, millions of borrowers who might benefit from them do not sign up, and the millions who do sign up are still often left with unmanageable monthly payments. To address these concerns and follow through on Congress’ original vision for income-driven repayment, the Department of Education is proposing a rule to do the following:

• For undergraduate loans, cut in half the amount that borrowers have to pay each month from 10% to 5% of discretionary income.
• Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
• Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with original loan balances of $12,000 or less. The Department of Education estimates that this reform will allow nearly all community college borrowers to be debt-free within 10 years.
• Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.

These reforms would simplify loan repayment and deliver significant savings to low- and middle-income borrowers. For example:

• A typical single construction worker (making $38,000 a year) with a construction management credential would pay only $31 a month, compared to the $147 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,400.
• A typical single public school teacher with an undergraduate degree (making $44,000 a year) would pay only $56 a month on their loans, compared to the $197 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,700.
• A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans, compared to the $295 they pay now under the most recent income-driven repayment plan, for annual savings of more than $2,800.

For each of these borrowers, their balances would not grow as long as they are making their monthly payments, and their remaining debt would be forgiven after they make the required number of qualifying payments. Further, the Department of Education will make it easier for borrowers who enroll in this new plan to stay enrolled. Starting in the summer of 2023, borrowers will be able to allow the Department of Education to automatically pull their income information year after year, avoiding the hassle of needing to recertify their income annually. Ensuring Public Servants Receive Credit Toward Loan Forgiveness Borrowers working in public service are entitled to earn credit toward debt relief under the Public Service Loan Forgiveness (PSLF) program. But because of complex eligibility restrictions, historic implementation failures, and poor counseling given to borrowers, many borrowers have not received the credit they deserve for their public service. The Department of Education has announced time-limited changes to PSLF that provide an easier path to forgiveness of all outstanding debt for eligible federal student loan borrowers who have served at a non-profit, in the military, or in federal, state, Tribal, or local government for at least 10 years, including non-consecutively. Those who have served less than 10 years may now more easily get credit for their service to date toward eventual forgiveness. These changes allow eligible borrowers to gain additional credit toward forgiveness, even if they had been told previously that they had the wrong loan type. The Department of Education also has proposed regulatory changes to ensure more effective implementation of the PSLF program moving forward. Specifically, the Department of Education has proposed allowing more payments to qualify for PSLF including partial, lump sum, and late payments, and allowing certain kinds of deferments and forbearances, such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service, to count toward PSLF. The Department of Education also proposed to ensure the rules work better for non-tenured instructors whose colleges need to calculate their full-time employment. To ensure borrowers are aware of the temporary changes, the White House has launched four PSLF Days of Action dedicated to borrowers in specific sectors: government employees, educators, healthcare workers and first responders, and non-profit employees. You can find out other information about the temporary changes on PSLF.gov. You must apply to PSLF before the temporary changes end on October 31, 2022. Protecting Borrowers and Taxpayers from Steep Increases in College Costs While providing this relief to low- and middle-income borrowers, the President is focused on keeping college costs under control. Under this Administration, students have had more money in their pockets to pay for college. The President signed the largest increase to the maximum Pell Grant in over a decade and provided nearly $40 billion to colleges and universities through the American Rescue Plan, much of which was used for emergency student financial aid, allowing students to breathe a little easier. Additionally, the Department of Education has already taken significant steps to strengthen accountability, so that students are not left with mountains of debt with little payoff. The agency has re-established the enforcement unit in the Office of Federal Student Aid and it is holding accreditors’ feet to the fire. In fact, the Department just withdrew authorization for the accreditor that oversaw schools responsible for some of the worst for-profit scandals. The agency will also propose a rule to hold career programs accountable for leaving their graduates with mountains of debt they cannot repay, a rule the previous Administration repealed. Building off of these efforts, the Department of Education is announcing new actions to hold accountable colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes. They also include requesting institutional improvement plans from the worst actors that outline how the colleges with the most concerning debt outcomes intend to bring down debt levels.  

More information on claiming relief will be available to borrowers in the coming weeks. Borrowers can sign up to be notified when this information is available at StudentAid.gov/debtrelief .

Stay Connected

We'll be in touch with the latest information on how President Biden and his administration are working for the American people, as well as ways you can get involved and help our country build back better.

Opt in to send and receive text messages from President Biden.

• Election 2024
• Entertainment
• Newsletters
• Photography
• Personal Finance
• AP Investigations
• AP Buyline Personal Finance
• Press Releases
• Israel-Hamas War
• Russia-Ukraine War
• Global elections
• Asia Pacific
• Latin America
• Middle East
• Election Results
• Delegate Tracker
• AP & Elections
• March Madness
• AP Top 25 Poll
• Movie reviews
• Book reviews
• Personal finance
• Financial Markets
• Business Highlights
• Financial wellness
• Artificial Intelligence
• Social Media

President Joe Biden will unveil his new plan to give student loan relief to many new borrowers

President Joe Biden speaks about lowering health care costs in the Indian Treaty Room at the Eisenhower Executive Office Building on the White House complex in Washington, Wednesday, April 3, 2024. (AP Photo/Mark Schiefelbein)

• Copy Link copied

WASHINGTON (AP) — President Joe Biden will announce his latest effort to broaden student loan relief next week for new categories of borrowers, according to three people familiar with the plans, nearly a year after the Supreme Court foiled his administration’s first attempt to cancel debt for millions who attended college.

Biden will detail the plan Monday in Madison, Wisconsin, where the flagship campus of the University of Wisconsin is located. The actual federal regulations — outlining who would qualify to get their student loan debt reduced or eliminated — are not expected to be released then, said the people, who were granted anonymity to detail a proposal not yet made public.

Much of the specifics that Biden will discuss Monday have long been telegraphed through a negotiated rulemaking process at the Department of Education , which has worked for months to hash out the new categories of borrowers. The president announced immediately after the Supreme Court decision that Education Secretary Miguel Cardona would undertake the process because he would have the power under the Higher Education Act to waive or compromise student loan debt in specific cases.

Still, the effort seeks to make good on Biden’s promise after the Supreme Court struck down his initial plan in June, a $400 billion proposal to cancel or reduce federal student loan debt that a majority of justices said required congressional approval. Biden called that decision a “mistake” and “wrong.”

And the fresh announcement on student loan relief, a vital issue for younger voters, could help energize parts of Biden’s political coalition who have become disillusioned over his job performance — people whose support the president will need to defeat presumptive Republican presidential candidate Donald Trump this year.

The plan that Biden will detail is set to expand federal student loan relief to new yet-targeted categories of borrowers through the Higher Education Act, which administration officials believe puts it on a stronger legal footing than the sweeping proposal that was killed by a 6-3 court majority last year. The planned announcement from Biden was first reported by the Wall Street Journal.

“This new path is legally sound,” Biden said in June. “It’s going to take longer, but, in my view, it’s the best path that remains to providing for as many borrowers as possible with debt relief.”

Biden’s latest attempt at cancellation is expected to be smaller and more targeted than his original plan, which would have canceled up to $20,000 in loans for more than 40 million borrowers. Details of the new plan have come into focus in recent months as the Education Department brought its ideas to a panel of outside negotiators with an interest in higher education, ranging from students to loan servicers.

“President Biden’s expected additional executive action will greatly reduce the burden of student loans for millions of Americans,” Senate Majority Leader Chuck Schumer, D-N.Y., said Friday. “There is always more work to be done to alleviate the burden of student loan debt. And we will not stop until crippling student loan debt is a thing of the past.”

Through that process, the agency laid out five categories of borrowers who would be eligible to get some or all of their federal loans canceled. The plan is focused on helping those with the greatest need for relief, including many who might otherwise never repay their loans.

Among those targeted for help are individuals whose unpaid interest has snowballed beyond the size of the original loan. The proposal would reset their balances back to the initial balance by erasing up to $10,000 or $20,000 in interest, depending on a borrower’s income.

Borrowers paying down their student loans for decades would get all remaining debt erased under the department’s plan. Loans used for a borrower’s undergraduate education would be canceled if they had been in repayment for at least 20 years. For other types of federal loans, it’s 25 years.

The plan would automatically cancel loans for those who went to for-profit college programs deemed “low-value.” Borrowers would be eligible for cancellation if, while they attended the program, the average federal student loan payment among graduates was too high compared to their average salary.

Those who are eligible for other types of cancellation but haven’t applied would automatically get relief. It would apply to Public Service Loan Forgiveness and Borrower Defense to Repayment, programs that have been around for years but require infamously difficult paperwork.

Under pressure from advocates, the department also added a category for those facing “hardship.” It would offer cancellation to borrowers considered highly likely to be in default within two years. Additional borrowers would be eligible for relief under a wide-ranging definition of financial hardship.

A series of hearings to craft the rule wrapped up in February, and the draft is now under review. Before it can be finalized, the Education Department will need to issue a formal proposal and open it to a public comment period.

The latest attempt at cancellation joins other targeted initiatives, including those aimed at public service workers and low-income borrowers. Through those efforts, the Biden administration says it has canceled $144 billion in student loans for almost 4 million Americans.

• Auto Insurance Best Car Insurance Cheapest Car Insurance Compare Car Insurance Quotes Best Car Insurance For Young Drivers Best Auto & Home Bundles Cheapest Cars To Insure
• Home Insurance Best Home Insurance Best Renters Insurance Cheapest Homeowners Insurance Types Of Homeowners Insurance
• Life Insurance Best Life Insurance Best Term Life Insurance Best Senior Life Insurance Best Whole Life Insurance Best No Exam Life Insurance
• Pet Insurance Best Pet Insurance Cheap Pet Insurance Pet Insurance Costs Compare Pet Insurance Quotes
• Travel Insurance Best Travel Insurance Cancel For Any Reason Travel Insurance Best Cruise Travel Insurance Best Senior Travel Insurance
• Health Insurance Best Health Insurance Plans Best Affordable Health Insurance Best Dental Insurance Best Vision Insurance Best Disability Insurance
• Credit Cards Best Credit Cards 2024 Best Balance Transfer Credit Cards Best Rewards Credit Cards Best Cash Back Credit Cards Best Travel Rewards Credit Cards Best 0% APR Credit Cards Best Business Credit Cards Best Credit Cards for Startups Best Credit Cards For Bad Credit Best Cards for Students without Credit
• Credit Card Reviews Chase Sapphire Preferred Wells Fargo Active Cash® Chase Sapphire Reserve Citi Double Cash Citi Diamond Preferred Chase Ink Business Unlimited American Express Blue Business Plus
• Credit Card by Issuer Best Chase Credit Cards Best American Express Credit Cards Best Bank of America Credit Cards Best Visa Credit Cards
• Credit Score Best Credit Monitoring Services Best Identity Theft Protection
• CDs Best CD Rates Best No Penalty CDs Best Jumbo CD Rates Best 3 Month CD Rates Best 6 Month CD Rates Best 9 Month CD Rates Best 1 Year CD Rates Best 2 Year CD Rates Best 5 Year CD Rates
• Checking Best High-Yield Checking Accounts Best Checking Accounts Best No Fee Checking Accounts Best Teen Checking Accounts Best Student Checking Accounts Best Joint Checking Accounts Best Business Checking Accounts Best Free Checking Accounts
• Savings Best High-Yield Savings Accounts Best Free No-Fee Savings Accounts Simple Savings Calculator Monthly Budget Calculator: 50/30/20
• Mortgages Best Mortgage Lenders Best Online Mortgage Lenders Current Mortgage Rates Best HELOC Rates Best Mortgage Refinance Lenders Best Home Equity Loan Lenders Best VA Mortgage Lenders Mortgage Refinance Rates Mortgage Interest Rate Forecast
• Personal Loans Best Personal Loans Best Debt Consolidation Loans Best Emergency Loans Best Home Improvement Loans Best Bad Credit Loans Best Installment Loans For Bad Credit Best Personal Loans For Fair Credit Best Low Interest Personal Loans
• Student Loans Best Student Loans Best Student Loan Refinance Best Student Loans for Bad or No Credit Best Low-Interest Student Loans
• Business Loans Best Business Loans Best Business Lines of Credit Apply For A Business Loan Business Loan vs. Business Line Of Credit What Is An SBA Loan?
• Investing Best Online Brokers Top 10 Cryptocurrencies Best Low-Risk Investments Best Cheap Stocks To Buy Now Best S&P 500 Index Funds Best Stocks For Beginners How To Make Money From Investing In Stocks
• Retirement Best Gold IRAs Best Investments for a Roth IRA Best Bitcoin IRAs Protecting Your 401(k) In a Recession Types of IRAs Roth vs Traditional IRA How To Open A Roth IRA
• Business Formation Best LLC Services Best Registered Agent Services How To Start An LLC How To Start A Business
• Web Design & Hosting Best Website Builders Best E-commerce Platforms Best Domain Registrar
• HR & Payroll Best Payroll Software Best HR Software Best HRIS Systems Best Recruiting Software Best Applicant Tracking Systems
• Payment Processing Best Credit Card Processing Companies Best POS Systems Best Merchant Services Best Credit Card Readers How To Accept Credit Cards
• More Business Solutions Best VPNs Best VoIP Services Best Project Management Software Best CRM Software Best Accounting Software
• Manage Topics
• Investigations
• Visual Explainers
• Newsletters
• Abortion news
• Coronavirus
• Climate Change
• Vertical Storytelling
• Corrections Policy
• College Football
• High School Sports
• H.S. Sports Awards
• Sports Betting
• College Basketball (M)
• College Basketball (W)
• For The Win
• Sports Pulse
• Weekly Pulse
• Buy Tickets
• Sports Seriously
• Sports+ States
• Celebrities
• Entertainment This!
• Celebrity Deaths
• American Influencer Awards
• Women of the Century
• Problem Solved
• Personal Finance
• Small Business
• Consumer Recalls
• Video Games
• Product Reviews
• Destinations
• Airline News
• Experience America
• Today's Debate
• Suzette Hackney
• Policing the USA
• Meet the Editorial Board
• How to Submit Content
• Hidden Common Ground
• Race in America

Personal Loans

Best Personal Loans

Auto Insurance

Best Auto Insurance

Best High-Yields Savings Accounts

CREDIT CARDS

Best Credit Cards

Advertiser Disclosure

Blueprint is an independent, advertising-supported comparison service focused on helping readers make smarter decisions. We receive compensation from the companies that advertise on Blueprint which may impact how and where products appear on this site. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Blueprint. Blueprint does not include all companies, products or offers that may be available to you within the market. A list of selected affiliate partners is available here .

Student Loans

What are student loans and how do they work?

Jennifer Calonia

“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.

Jamie Young

Updated 1:58 p.m. UTC April 1, 2024

• path]:fill-[#49619B]" alt="Facebook" width="18" height="18" viewBox="0 0 18 18" fill="none" xmlns="http://www.w3.org/2000/svg">
• path]:fill-[#202020]" alt="Email" width="19" height="14" viewBox="0 0 19 14" fill="none" xmlns="http://www.w3.org/2000/svg">

Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy .

PeopleImages, Getty Images

Since 1963, the cost of college tuition has increased more than 747% — a fact that makes it daunting to pay such costs entirely out of pocket from personal savings. Faced with the steep cost of higher education, many prospective students turn to student loans.

The latest data from the National Center for Education Statistics (NCES) found that about 30% of students borrowed federal loans for undergraduate school. NCES also reported that those who obtained federal student loans borrowed an average of $6,598.

Student loans can be a useful way to finance your degree. But before taking on thousands of dollars in debt , it’s important to understand what student loans are and how they work.

Our Partner

Undergraduate Cosigned Credit Based

Variable APR

What are student loans?

Student loans are a financial aid option designed to help cover the costs of higher education expenses. These loans are provided in a lump-sum and are repaid in installments. The debt must be paid back over an agreed timeline, plus interest (and fees, if applicable).

There are two main types of student loans : federal student loans and private student loans. Understanding the difference between these two types of loans is critical as each has its own pros and cons as well as its own eligibility requirements, rates and repayment terms.

How federal student loans work

Federal student loans function in many of the same ways as other types of personal loans. You are able to borrow money to cover the cost of college and the debt is repaid in installments at a later date with interest.

In the case of federal student loans, the funding is offered by the U.S. Department of Education and you will need to complete the Free Application for Federal Student Aid (FAFSA) in order to access the loans and determine whether you’re eligible for aid and exactly how much.

Your school will review your eligibility, and if it determines that you qualify for federal loans, it also calculates how much money you can borrow per school year.

Federal loans have annual and aggregate borrowing limits. However, you might not be offered the maximum amount, even if you qualify for a federal student loan.

“Depending on the student’s scholarship, grant and work-study aid, how much they can borrow may be restricted to an amount lower than the federal limit,” says Pam Sittig, director of financial aid at Grinnell College.

If awarded a federal loan as part of your financial aid, you can claim the full or partial amount that’s offered. The funds are disbursed directly to your school. 

There are various federal loan options — some designed for undergraduate students, while others are designed for graduate students and even the parents of dependent students. Some of these loans are available to students who demonstrate financial need on their FAFSA application, while others are not need-based. 

These options include:

• Direct Subsidized Loans: These are need-based student loans that are exclusively offered to undergraduate students. Interest on Direct Subsidized Loans that accrues during school, the grace period after graduation, and during deferment is paid by the government. 
• Direct Unsubsidized Loans: These loans aren’t based on need and are for undergraduates, and graduate- and professional-level students. Borrowers are responsible for all interest that accrues on this loan.
• Direct PLUS Loans: A loan that’s not based on need, Direct Plus funding is available to graduate and professional students (Graduate PLUS) and also to parents of dependent undergraduate students (Parent PLUS). Borrowers are responsible for all interest that accrues on this loan, and it’s the only federal loan that requires a credit check.
• Direct Consolidation Loans: This loan program allows borrowers to merge all of their existing federal student loans together into one single loan with one servicer.  

After leaving school, you’ll start making payments toward your loan, after a six-month grace period. The default repayment plan is 120 equal monthly payments over 10 years, but you can ask your loan servicer about other repayment plan options. 

How private student loans work

Private student loans aren’t beholden to the rules and procedures of federal student loans. This type of student loan is offered and funded by private financial institutions, such as traditional banks, credit unions, online institutions and schools.

Like other consumer loans, such as car loans and personal loans, a private student loan requires an established credit history. Lenders have different underwriting requirements that borrowers must meet to get loan approval.

If approved, a lump-sum disbursement might be sent directly to you or your school. Interest charges and installment payments typically start as soon as the funds are released. Some lenders allow you to defer your payments, however, while enrolled in school, but not all do. 

There’s no standardized rate or repayment period for private student loans, as lenders can set their own rates and terms. Some may have fixed interest rates, while others come with a variable rate. Additionally, private student loans don’t qualify for federal benefits, protections or programs such as student loan forgiveness.  

How to apply for student loans

The process for applying for student loans depends on the loan type you’re interested in.

Applying for federal student loans

You can complete the required FAFSA application online at StudentAid.gov, or submit a paper application by mail. To do so, you’ll need a variety of personal information, such as your date of birth, Social Security number or Alien Registration number, if you’re not a U.S. citizen. You’ll also need to provide financial information including federal tax returns for you and for your parents, if you’re a dependent.

The deadline for the FAFSA is on June 30th before the academic year for which you’re seeking aid. There might be other deadlines to know for state and school aid programs so confirm those dates in advance.

Before beginning the FAFSA application, it’s a good idea to create an account on the StudentAid.gov website. This will include an account username and password, which, combined, become your FSA ID. Establishing an FSA ID allows you to sign FAFSA forms electronically and helps eliminate any errors during the application process.

Applying for private student loans

For private loans, you can apply directly with the lender or partnering marketplace. You might be required to secure a co-signer for the loan. A co-signer takes legal financial responsibility for repaying the loan, if you are unable to make payments or default.

Before accepting a loan, shop around with a handful of private lenders . Compare interest rates, repayment terms, loan features and benefits to find one that’s best for you. 

Should you use student loans for school?

Student loans offer a lifeline for those who can’t afford to pay for school and other college-related expenses, out of pocket. Sittig notes that there are many reasons that students might want to borrow student loans, beyond the basic cost of tuition. 

“Other reasons to borrow include choosing to study abroad, choosing not to work so they can participate in multiple extracurricular activities, or choosing an unpaid internship,” says Sittig. “While borrowing should never be taken lightly, it can aid in providing experiences that contribute greatly to their overall educational experience, learning, growth, and thereby future earning potential.”

However, if not managed responsibly and repaid as agreed, student loans can balloon into a significant financial burden. It’s important to calculate the full cost of the loan and have a plan for repayment.

Alternatives to student loans

• Scholarships: These can be merit- or need-based financial aid that is not required to be paid back. Find scholarships through federal, state, city and local community sources, as well as businesses and nonprofit organizations.
• Grants: Grants are a form of gift aid for students who meet certain requirements. The key distinction is that this money does not need to be paid back. The federal Pell Grant Program , for example, is offered to undergraduates with exceptional financial need. You can find these opportunities through your state and local government, school, and private sources.
• Work-Study: A federal program that lets you earn federal aid through qualified part-time employment.

Lowering your college-related expenses is another way to reduce the amount of loans you need to obtain.

“If they can curb discretionary spending while in college, they can keep their borrowing to only necessities, which will lead to smaller student loan payments and more discretionary funds later,” says Sittig. She suggests students ask their financial aid office about budgeting and savings resources that can help make the cost of college more manageable.

Frequently asked questions (FAQs)

Loan payments are made to your student loan servicer, based on your loan agreement’s repayment plan, which varies based on whether it’s a private student loan or a federal student loan. In the case of federal student loans, when the loan enters the repayment period, you’ll automatically be placed into what’s known as the Standard Repayment Plan. But borrowers are able to request a different repayment plan.

No. Student loan forgiveness is a federal benefit that’s applicable to certain federal student loans only.

The repayment period for student loans varies, based on the details of your loan agreement. For example, federal student loans have a default 10-year repayment term, but borrowers can choose plans with terms up to 25 years, if desired.

If you borrowed federal student loans, the funds are disbursed directly to your school. For private student loans, it depends on its policy. Lenders might disburse funds to your institution, or to you so you can pay for school.

If you don’t pay for your student loans, your loan might be marked as delinquent or in default, which is reported to the national credit bureaus. It negatively affects your credit, and you might not be able to secure future student loan aid. Additionally, the debt might be sent to collections and might lead to wage garnishment, withheld tax refunds, and more. 

*Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs. Rates are effective as of 4/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require interest-only payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy . The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

More than a decade covering the personal finance beat as a writer and editor. Her work has been featured on national publications like Yahoo Finance, MSN Money, TIME Money, and more.

Mia Taylor is an award-winning journalist and editor. She has been writing and editing professionally for 20 years and holds an undergraduate degree in print journalism and a graduate degree in journalism and media studies. Her career includes working as a staff writer for The Atlanta Journal-Constitution, Fortune, Better Homes & Gardens, Real Simple, Parents, and Health. She was also a longtime contributor for TheStreet and her work regularly appears on Bankrate. A single mother, Mia is passionate about helping women succeed financially, including developing confidence about investing, retirement, home buying, and other important personal finance decisions. When she's not busy writing about money topics, Mia can be found globetrotting with her son.

Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.

How the FAFSA differs for grad school

Student Loans Jennifer Calonia

What is student loan forbearance?

Online schools that accept the FAFSA (and how to fill it out)

Student Loans Rebecca Safier

SoFi student loan and student loan refinancing review: Low minimum rates and multiple loan terms

Student Loans Kiah Treece

How to decide if college is worth the cost

8 ways to pay off your student loans faster

Student loan forgiveness programs: 10 options and how to qualify

Student Loans Jess Ullrich

Is it possible to get a student loan with bad credit?

Guide to refinancing your student loans

Best student loans without a co-signer of April 2024

Best private student loans of April 2024

Student Loans Dori Zinn

Best student loan refinance lenders of April 2024

Best student loans for bad credit or no credit in April 2024

Best low-interest student loans of April 2024

3 ways to get a lower student loan interest rate

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

How to Get a Student Loan

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

Learn more about private student loans

Find a student loan: Compare private student loans , types and rates

Pros and cons: How federal and private student loans differ

How to apply: Wondering where to apply for student loans first?

Most students — 7 in 10 — borrow money to pay for college . If you're one, you have two types of student loans to choose from: federal or private.

If you're an undergraduate, always start with federal loans. They don't require a credit history or a co-signer and they offer more generous protections for borrowers, such as income-driven repayment and loan forgiveness, than private student loans do.

» MORE: Your guide to financial aid

Before you borrow, think ahead to how you’ll repay debt. Put a dollar figure on it by using a student loan payment calculator . This is the bill you’ll be paying every month for 10 years or longer. Borrow only what you need, and don’t take on an amount or an interest rate you can’t expect to handle right after graduation.

Here's how you can get federal and private student loans.

How to get a federal student loan

Start by submitting the fafsa.

Submit a Free Application for Federal Student Aid, or FAFSA , to find out how much financial aid you may qualify for, such as grants, scholarships and work-study, that won’t have to be repaid. It takes about 30 minutes to complete. Each school you apply to will use the FAFSA to determine your financial aid; the gap between aid and cost of attendance is what you have to cover.

» MORE: How much financial aid will I get?

Borrow subsidized loans before unsubsidized

The FAFSA serves as your application for federal student loans as well. You’ll be notified of what you can borrow in the financial aid award letter from any school that accepts you. There are two types of federal loans: subsidized and unsubsidized.

Subsidized federal loans go to undergraduate students with a financial need. The subsidy covers the interest on the loan while you’re in school. Unsubsidized federal loans aren’t based on need, and interest starts to accrue immediately.

» MORE: How much can you get in student loans?

How to get a private student loan

Consider private student loans to cover any remaining costs after grants, scholarships, work-study and federal loans. They're a viable option if you have good credit or a co-signer who does.

Where to get a private student loan

Banks, credit unions, state-based agencies and online lenders all offer student loans. Shop around with multiple lenders, weighing repayment flexibility and forbearance options as well as the interest rates offered .

Student loans from our partners

on Sallie Mae

4.5% - 15.49%

Mid-600's

on College Ave

College Ave

4.07% - 15.48%

4.09% - 15.66%

Low-Mid 600s

12.9% - 14.89%

13.74% - 15.01%

5.24% - 9.99%

5.49% - 12.18%

on Splash Financial

Splash Financial

6.64% - 8.95%

4.07% - 14.49%

5.09% - 14.76%

4.11% - 14.3%

6.5% - 14.83%

» MORE: Compare your private student loan options

How to get approved for a private student loan

Most private lenders will require borrowers to have good credit and an income that can support loan payments while meeting other debts (in other words, a low debt-to-income ratio). If you don't meet those qualifications, you'll need a co-signer who can.

Private lenders don't technically list a co-signer as a requirement, but you'll have difficulty getting a private loan without one. About 87% of all new undergraduate private student loans had a co-signer for the 2020-21 academic year, according to a 2021 report by MeasureOne.

If you don't have a co-signer, a few private lenders gear loans toward independent students, but you’ll pay more.

» COMPARE : Student loans without a co-signer

Parents looking for loans to pay for their child’s education have federal and private loan options available. Each option will require a credit check. There are three primary options to consider:

• Direct PLUS loans: Direct PLUS loans are the only federal student loan that parents can take. You’ll need to submit a FAFSA with your child and complete a parent direct PLUS loan application to borrow. • Co-signed private student loan: Co-signing a loan with your child will make you equal borrowers. It’s best if you have good credit, a steady income and are willing to take on the responsibility of paying the debt if your child can’t. • Private college loans for parents: Certain private lenders may offer private college loans for parents to borrow rather than co-signing on a student loan. The debt is your sole responsibility.

» MORE: Should you co-sign a student loan?

Graduate students loans include two federal loan options, along with private loans.

• Federal direct unsubsidized loans. Graduate students can borrow up to $20,500 each year. To apply, submit the FAFSA. There is no credit check involved. • Federal direct PLUS loans. Graduate students can borrow up to the cost of attendance minus any other financial aid. Your credit is considered. To apply, submit the FAFSA and complete a graduate student direct PLUS loan application. • Private student loans. Apply directly with a bank, credit union or online lender. Your credit history affects the interest rate and repayment terms. Some private lenders may have specific loans for graduate students depending on field of study. You typically can borrow up to the cost of attendance minus any other financial aid.

» MORE: Compare graduate loans

On a similar note...

National Politics | President Biden says he has a new plan for…

Share this:.

• Click to share on Facebook (Opens in new window)
• Click to share on Twitter (Opens in new window)
• Click to print (Opens in new window)
• Click to email a link to a friend (Opens in new window)
• Click to share on Reddit (Opens in new window)

Today's e-Edition

• Latest News
• Environment
• Transportation

Breaking News

National politics | attorneys for condemned killer of 12-year-old polly klaas ask judge to reconsider death sentence, national politics, national politics | president biden says he has a new plan for student loan relief, biden will detail the plan monday in madison, wisconsin.

By Seung Min Kim and Collin Binkley | Associated Press

WASHINGTON — President Joe Biden will announce his latest effort to broaden student loan relief next week for new categories of borrowers, according to three people familiar with the plans, nearly a year after the Supreme Court foiled his administration’s first attempt to cancel debt for millions who attended college.

Biden will detail the plan Monday in Madison, Wisconsin, where the flagship campus of the University of Wisconsin is located. The actual federal regulations — outlining who would qualify to get their student loan debt reduced or eliminated — are not expected to be released then, said the people, who were granted anonymity to detail a proposal not yet made public.

Much of the specifics that Biden will discuss Monday have long been telegraphed through a negotiated rulemaking process at the Department of Education, which has worked for months to hash out the new categories of borrowers. The president announced immediately after the Supreme Court decision that Education Secretary Miguel Cardona would undertake the process because he would have the power under the Higher Education Act to waive or compromise student loan debt in specific cases.

Still, the effort seeks to make good on Biden’s promise after the Supreme Court struck down his initial plan in June, a $400 billion proposal to cancel or reduce federal student loan debt that a majority of justices said required congressional approval. Biden called that decision a “mistake” and “wrong.”

And the fresh announcement on student loan relief, a vital issue for younger voters, could help energize parts of Biden’s political coalition who have become disillusioned over his job performance — people whose support the president will need to defeat presumptive Republican presidential candidate Donald Trump this year.

The plan that Biden will detail is set to expand federal student loan relief to new yet-targeted categories of borrowers through the Higher Education Act, which administration officials believe puts it on a stronger legal footing than the sweeping proposal that was killed by a 6-3 court majority last year. The planned announcement from Biden was first reported by the Wall Street Journal.

“This new path is legally sound,” Biden said in June. “It’s going to take longer, but, in my view, it’s the best path that remains to providing for as many borrowers as possible with debt relief.”

Biden’s latest attempt at cancellation is expected to be smaller and more targeted than his original plan, which would have canceled up to $20,000 in loans for more than 40 million borrowers. Details of the new plan have come into focus in recent months as the Education Department brought its ideas to a panel of outside negotiators with an interest in higher education, ranging from students to loan servicers.

“President Biden’s expected additional executive action will greatly reduce the burden of student loans for millions of Americans,” Senate Majority Leader Chuck Schumer, D-N.Y., said Friday. “There is always more work to be done to alleviate the burden of student loan debt. And we will not stop until crippling student loan debt is a thing of the past.”

Through that process, the agency laid out five categories of borrowers who would be eligible to get some or all of their federal loans canceled. The plan is focused on helping those with the greatest need for relief, including many who might otherwise never repay their loans.

Among those targeted for help are individuals whose unpaid interest has snowballed beyond the size of the original loan. The proposal would reset their balances back to the initial balance by erasing up to $10,000 or $20,000 in interest, depending on a borrower’s income.

Borrowers paying down their student loans for decades would get all remaining debt erased under the department’s plan. Loans used for a borrower’s undergraduate education would be canceled if they had been in repayment for at least 20 years. For other types of federal loans, it’s 25 years.

The plan would automatically cancel loans for those who went to for-profit college programs deemed “low-value.” Borrowers would be eligible for cancellation if, while they attended the program, the average federal student loan payment among graduates was too high compared to their average salary.

Under pressure from advocates, the department also added a category for those facing “hardship.” It would offer cancellation to borrowers considered highly likely to be in default within two years. Additional borrowers would be eligible for relief under a wide-ranging definition of financial hardship.

A series of hearings to craft the rule wrapped up in February, and the draft is now under review. Before it can be finalized, the Education Department will need to issue a formal proposal and open it to a public comment period.

The latest attempt at cancellation joins other targeted initiatives, including those aimed at public service workers and low-income borrowers. Through those efforts, the Biden administration says it has canceled $144 billion in student loans for almost 4 million Americans.

• Report an error
• Policies and Standards

More in National Politics

National News | Meta accused of censoring newspaper, reports critical of company

College Sports | California bill could expose what Title IX lawsuit calls ‘shocking’ gender inequities in how college athletes are paid

National Politics | Arson suspected as Sen. Sanders’ Vermont office catches fire

National Politics | Some of the most vocal Trump opponents worked in his White House

• {{children.title}} {{currentYear}} {{children.title}}

{{parent.cta_data.text}}

• Manage Account
• GET STARTED

How Do Student Loans Work?

By Jeff White, CEPF

July 25, 2023

If you don’t have enough money to pay for college, a student loan will enable you to borrow money and pay it back later, with interest.

College loans are like any other loan in that you’ll have to repay the principal with interest, though some offer favorable repayment terms. Interest rates, loan terms, and fees can all impact how much you need to pay over the entire life of any student loan.

Let’s dive into how student loans work. When you’re borrowing for college, it’s important to understand what you’re agreeing to repay.

Types of Student Loans

Two main types of lenders offer student loans to college students. The U.S. federal government offers federal student loans through the U.S. Department of Education, and banks, credit unions, state loan agencies, and other financial institutions offer private student loans .

Federal Loans

The U.S. government offers federal student loans . It’s a good idea to take out federal loans first because they are less expensive and usually come with more borrower protections than loans from private lenders. Federal loan eligibility is determined by filing the FAFSA.

The advantages of a federal loan over a private loan include:

• Fixed and, sometimes, lower interest rates
• The ability to borrow money without a cosigner
• A 6-month grace period after graduation before repayment
• Flexible repayment plans like income-driven repayment and extended repayment
• There is also the possibility that some of your loans can be forgiven — that is, you don’t have to repay them — if you work in certain professions, such as teaching and public service

There are four types of federal student loans for college:

• Direct Subsidized Loan: Subsidized Stafford loans , also known as direct subsidized loans, are available to undergraduate students with demonstrated financial need. You won’t have to pay interest on the borrowed amount while enrolled in college at least half-time and for six months after you graduate or drop below half-time enrollment. This can be a huge cost savings.
• Direct Unsubsidized Loan : Unsubsidized Stafford loans are available to undergraduate and graduate students, regardless of financial need. Unlike subsidized loans, you will need to pay the interest accrued on your loan while you are in college, or the interest will be capitalized (added to the loan balance).
• Federal Direct PLUS Loan: Grad PLUS and Parent PLUS loans are available to graduate and dependent undergraduate students’ parents. PLUS loans aren’t subsidized, so interest will start accruing once the loan is fully disbursed. Repayment can be deferred while the student is enrolled in college and for six months after graduation.
• Federal Direct Consolidation Loan: Consolidation loans allow you to combine multiple federal student loans into one loan without losing the benefits of the federal loans. Consolidation can be used to streamline repayment or to switch your loan servicer. A Federal Direct Consolidation Loan will not impact the interest rates of your student loans.

Private Loans

Private student loans come from a private lender , usually a bank, a credit union, a state loan agency, or a non-bank financial institution. These loans can come with fixed interest rates or variable interest rates and often require the student borrower to have a cosigner .

Private student loan interest isn’t subsidized, so as soon as you borrow money, the loan will begin accruing interest like unsubsidized federal loans. They have higher interest rates than several types of federal loans, but borrowers with good credit or a credit-worthy cosigner may find that private loans offer lower interest rates than the Parent PLUS Loan. Private student lenders generally do not charge origination fees as federal loans do.

How Interest Works for Student Loans

Because you’re not just paying back the amount you borrow, you’re paying back interest (just like credit cards ), it’s important to understand how much that will add to the total amount you pay.

How much you pay in student loan interest depends on several factors, including whether your loan is subsidized or unsubsidized, the interest rate on your loan, the amount you borrow, and the loan term.

For example, you graduate with a $10,000 loan with a 5% interest rate and plan to pay it off over 10 years. You will pay $2,728 in interest over the 10 years you repay the loan. Your monthly student loan payment will include payments to reduce the principal balance (the amount borrowed) and interest payments. The total amount repaid will be $12,728, including principal and interest. 

Interest generally continues to accrue during forbearances and other periods of non-payment. So, if you take a break from repaying your loans or skip a loan payment, the loan’s total cost will increase, not just because of late fees.

Loan payments are applied to the loan balance in a particular order. First, they are applied to late fees and collection charges. Second, they are applied to the interest accrued since the last payment. Finally, any remaining money is applied to the principal balance. So, paying more each month will make quicker progress in paying down the debt.

Congress determines the interest rates for federal subsidized and unsubsidized loans, and rates vary for different types of loans.

For the 2023-2024 academic year, student loan interest rates are:

For private loans, lenders require a credit check and set an interest rate based on your situation, such as your income and credit history.

You can use a loan calculator to calculate exactly how much you’ll pay in interest, and this article explains how student loan interest works.

How to Pay Less Interest

You can reduce the amount you pay in interest by making extra loan payments to pay it off sooner or by refinancing your student loan to a loan with a lower interest rate. However, refinancing federal student loans into a private loan means a loss in many benefits – income-driven repayment options, possible student loan forgiveness or widespread forgiveness, generous deferment options, and a death and disability discharge.

How Much You Can Borrow Through Student Loans

You will have to repay the money you borrow with your student loans for college; you only have to borrow what you really need. The loan amount that you can borrow depends on the type of loan. For federal loans, your college will determine the amount of money that you can borrow, but there are some limits :

• Undergraduate Federal Direct Stafford Loans : Depending on your year in school, the borrowing limits are $5,500 to $7,500 per year for dependent undergraduate students and $9,500 to $12,500 per year for independent students. Aggregate limits between $31,000 and $57,500 also apply.
• Graduate Federal Direct Stafford Loans: The borrowing limit is up to $20,500 per year for graduate and professional students, with aggregate limits of $138,500 and up to $40,500 per year for medical school students.
• Private Loans: The maximum amount you can borrow from a private lender varies. Most lenders don’t let you borrow more than your college’s cost of attendance minus other financial aid.

Direct loans are also subject to aggregate loan limits , meaning there’s a maximum amount that you can have in outstanding loans. The borrowing limit for Federal Direct PLUS loans is generally the remainder of the cost of college not covered by Federal Direct Stafford loans and any other financial aid.

Expenses You Can Use Student Loans For

Federal subsidized and unsubsidized student loans can be used to pay for most expenses associated with your college education, such as:

• School fees
• Room and board
• Meal plans or groceries
• Books and supplies
• Computers and other needed technology
• Transportation

How private student loans work and their exact terms can vary depending on the lender. While most are very similar to federal student loan allowances, some may put different limitations on the expenses you can pay with the loan funds.

Costs of Student Loans in 2024

The total amount you’ll need to pay over the life of your student loan includes the principal, interest, and loan fees. All federal loans are subject to loan origination fees: around 1% of the loan amount for direct subsidized and unsubsidized student loans and around 4% for direct PLUS loans.

Private student loans may also have origination fees, though these are normally built into the interest rate. They may also be subject to other charges, such as late payment fees.

Let’s look at examples of how much a student loan costs throughout the full repayment period based on different APY ranges. (The APY is the annual interest rate plus fees, considering the impact of compound interest over time.)

All calculations were made using our free loan calculator . 

How to Apply for Student Loans

The application process for federal student loans and private student loans is different. Remember, you should only apply for a private student loan once you have exhausted your federal loan options.

Applying for Federal Student Loans

You must file the Free Application for Federal Student Aid (FAFSA) to apply for a federal student loan. The information on the FAFSA will determine how much you can borrow. Your college will send you a financial aid offer, including details on how to accept your loan. You will then need to sign a Master Promissory Note (MPN) .

Applying for Private Student Loans

To apply for a private loan, you don’t need to file a FAFSA. You’ll need to apply with an individual lender. The lender will check your credit score and often requires a creditworthy cosigner.

It is helpful to apply to multiple lenders to find the best interest rate and terms for you. Find private student loan options here . 

How Repayment Works for Student Loans

Federal Direct Stafford loans require that you begin loan repayment six months after you graduate, leave school, or drop below half-time enrollment. Although Federal Direct PLUS loans previously entered repayment within 60 days of full disbursement, since 2008, borrowers have been able to defer repayment until six months after the student graduates or drops below half-time enrollment.

Federal student loans offer a range of repayment options, and this flexibility can be highly beneficial, allowing you to choose the student loan repayment term or plan that best suits your individual needs. Along with the Standard Repayment Plan, which is fixed monthly payments over 10 years, federal repayment plans include:

• Income-driven repayment plans: You make monthly repayments based on your income, between 5% and 20% of your discretionary income. This includes the Saving on a Valuable Education (SAVE) Plan—formerly the REPAYE Plan, Pay As You Earn (PAYE) Plan, Income-Based Repayment (IBR) Plan, and Income-Contingent Repayment (ICR) Plan.
• Graduated repayment plans: Start with lower monthly payments that gradually increase so that you still pay the loan off in the standard 10 years.
• Extended repayment plans: Typically designed to be paid off in 25 years, they offer fixed or graduated repayments.

Private loan repayment depends on the terms set by the lender. You may find that your lender requires you to make loan payments while still in school, though there may be options to defer (postpone) making loan payments. Interest continues to accrue during an in-school deferment and grace period.

Student loans are a great option for financing your education if you don’t have the money to pay for college. But it’s important to understand how loans work so there aren’t any surprises when it’s time to begin repayment.

The Bottom Line

When understanding how student loans work, it’s important to consider factors such as fees, interest, and the impact of compound interest over the life of your loan. Lower interest rates mean that you’ll pay less over the life of the loan, but paying off your loan sooner can also make a big difference.

Federal student loans generally offer more favorable interest rates and terms, while private student loans can be a good option for those with established credit or if federal loans aren’t available.

Frequently Asked Questions (FAQs)

What happens to student loan debt when you die.

This depends on the type of loan: Federal student loans may be forgiven if you die. Equally, federal Parent PLUS loans are usually forgiven if the student benefitting from the loan dies or if the parent who took out the loan does. For private student loans, this depends on the loan, as each lender has its own policies. It’s important to check the lender’s specific policy, though many will discharge the debt owed upon the primary borrower’s death.

How long does it take to pay off student loans on average?

Depending on the type of loan and the repayment plan, you can take five to 30 years to repay your student loans. A 10-year repayment plan is standard for federal student loans, but there are federal plans that you can repay in 20, 25, or even 30 years. For private student loans, you’ll usually have a choice of a range of repayment periods between five and 20 years, though you’ll typically enjoy lower interest rates if you opt for a shorter option.

Do student loans destroy credit?

Not necessarily. Paying off your student loans promptly will be good for your credit, just like any other loan. However, if you are late with your repayments or default on your loan, this can be disastrous for your credit score.

Can I get a student loan without my parents’ help?

Yes, it’s possible to get student loans without your parents’ help, though some borrowing options may be more difficult or impossible as an unsupported student borrower. However, federal student loans work without a parent borrower or cosigner. You could also use tuition installment plans, qualify as an independent student to increase federal student loan limits or have someone other than a parent act as a cosigner on a private loan.

Check this guide for more advice on getting student loans without your parents’ help.

Related Articles

The 15 lowest-cost 529 savings plans

Can You Use Student Loans to Pay for Rent?

Can I Buy a House and Pay My Mortgage with 529 Plan Money?

6 Best Banks for College Students

A good place to start:

See the best 529 plans, personalized for you

Unlock Printing

Already have an account? Log in

An official website of the United States government

Here’s how you know

Official websites use .gov A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS A lock ( Lock Locked padlock icon ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Free Application for Federal Student Aid (FAFSA)

Federal Student Aid offers grants, loans, work-study, and more to help you pay for college or career school. Use the Free Application for Federal Student Aid (FAFSA) to apply.

Begin the FAFSA application

Applying for federal student aid

You must complete the FAFSA application on time to be considered for federal student aid. States and colleges also use FAFSA information to award their own financial aid packages.

FAFSA deadlines

Federal deadlines to submit the FAFSA are:

• June 30, 2025, for school year 2024-25
• June 30, 2024, for school year 2023-24

Many states use the FAFSA for their financial aid programs. See the state deadlines .

Create a FAFSA account and login

Create an account and get an FSA ID. You can use your FSA ID right away to sign and submit your first FAFSA form. But to use your FSA ID for anything else, you will have to wait up to three days for your information to be confirmed by the Social Security Administration (SSA).

Log in to the FAFSA if you already have an account.

Fill out the FAFSA

Find out what information you need to fill out the FAFSA.  It will be easier to complete the form if you have everything together before you start.

Begin the FAFSA application.

Avoid financial aid scams

You may not need to hire a company to help you find financial aid. Instead, search online for scholarships or ask a school guidance counselor for help. Learn what questions to ask before paying for help finding financial aid.

Eligibility for federal student aid

To be considered for federal student aid, you must meet these basic eligibility requirements , including financial need.

Check your FAFSA application status

After you submit your application, check its status to make sure it has been processed. You can:

• Log in to your account at fafsa.gov
• Or contact the Federal Student Aid Information Center

If you submit a paper FAFSA form, you can check its status 7–10 days after you mail it. 

You will receive a report with a summary of the information you entered on your FAFSA form. Review it and make any necessary corrections by the due date.

Get more tips to help with the new responsibilities of adulthood.

Transitioning to adulthood

LAST UPDATED: February 27, 2024

Have a question?

Ask a real person any government-related question for free. They will get you the answer or let you know where to find it.

• Share full article

Advertisement

Supported by

Biden Will Try Again to Wipe Out Student Loan Debt for Millions of Borrowers

The Supreme Court blocked President Biden’s first attempt at large-scale student debt relief last summer.

By Michael D. Shear

Reporting from Washington

President Biden will announce a new effort on Monday to reduce or eliminate student loan debt for millions of borrowers, an election-year attempt to revive his goal of providing large-scale relief for Americans struggling to pay off their college loans, a person familiar with the plan said Friday.

Mr. Biden is expected to preview new regulations by the Education Department targeting millions of borrowers, including those whose loans have ballooned because of accrued interest and others who can demonstrate financial hardship impeding repayment, according to the person, who spoke on the condition of anonymity because the regulations have not yet been formally proposed by the department.

The proposed regulations are set to be published over the next few weeks. Mr. Biden will speak about the effort during a visit to Wisconsin on Monday, which will coincide with an event on student loans with Vice President Kamala Harris in Philadelphia.

The push is a recognition by Mr. Biden and his allies of the disappointment felt by his supporters — especially young voters — when the president’s first attempt to wipe out student deb t was blocked by the Supreme Court last summer. The court said that the government exceeded its authority under federal law when it attempted to cancel up to $400 billion in student loans.

Since then, the Biden administration has used existing laws to provide debt relief to smaller pockets of borrowers. Monday’s announcement is expected to eventually reach a larger group, though officials said it would still be more targeted than the across-the-board relief that the Supreme Court already struck down.

Once the proposed regulations are officially published in the Federal Register, it will still be months before they can go into effect because of a required public comment period. Biden administration officials expect that the new rules are likely to be challenged in court, which could further delay any reductions in debt.

Officials have said they believe the new proposed regulations would be more likely to survive legal challenges because they are based on a different federal law and they are more targeted to people in specific situations. The president’s previous effort was based on the Heroes Act, which allows the education secretary to waive debt during an emergency; the current regulations would be authorized by the Higher Education Act.

Politically, the timing is critical for Mr. Biden as he battles former President Donald J. Trump for another term in the White House.

The president’s popularity among young people, a group that was critical to his 2020 victory, has dropped significantly in the past several years. A December poll conducted by The New York Times and Siena College found that Mr. Biden is trailing Mr. Trump among voters 18 to 29, which is a dramatic turnabout. In 2020, Mr. Biden won that group by 20 percentage points.

Officials at the White House and the Education Department declined to comment on the expected regulations, which were reported earlier by The Wall Street Journal.

But details about the proposed rules have been discussed and debated for months in a series of public hearings with stakeholders. Transcripts of those meetings and drafts of the proposed regulations provide a road map for the administration’s announcement.

On Feb. 22, the department released a draft of a regulation titled “Forgiveness due to likely impairment of borrower ability to repay or undue costs of collection.”

The proposed language in the regulation said that the U.S. education secretary could waive student debt when it was determined that “a borrower has experienced or is experiencing hardship related to such a loan such that the hardship is likely to impair the borrower’s ability to fully repay the federal government or the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt.”

That regulation listed 17 factors to consider when assessing whether a borrower qualifies for the hardship waiver. Those include: household income and assets, student loan balance, total loan balance, age, disability, high cost burdens for essential expenses such as health care, and “any other indicators of hardship identified by the secretary.”

On Dec. 11, discussions about potential new regulations included a proposal to allow the education secretary to waive student debt when the total amount owed by a borrower exceeds the original principal on the loan because of accrued interest.

“The secretary may waive the lesser of $20,000 or the amount by which a borrower’s loans cumulatively have a total outstanding balance that exceeds the original principal balance of the loans,” said the proposed text for the regulation distributed at the meeting.

The actual regulations published are likely to differ, at least slightly, from the ones discussed in the public meetings, the person familiar with the discussions said. But Mr. Biden is expected to embrace help for those with financial hardship and those with high balances because of accumulated interest.

Michael D. Shear is a White House correspondent for The New York Times, covering President Biden and his administration. He has reported on politics for more than 30 years. More about Michael D. Shear

• Student Loans Explained How Do They Work
• Student Loans

If you find yourself asking, “How do student loans work?” you’re certainly not alone. Researchers say that the majority of students don’t understand the ins and outs of loan products. People are sensitive to college costs, and they want to save money. They just don’t know how to make that happen. 

The student loan process can be confusing. But student loans are critical for you to understand. 

The financial lift you get from the right product could help you cover your tuition bills so you can stay in school. And understanding the terms can ensure that you pay your student loan debt as agreed rather than facing financial ruin from default. 

Your best source for valid, up-to-date information is your school’s financial aid office. But if you’re not sure what to ask, the following information can help.

• How Do I Get a Student Loan?

The federal government offers student loans with some of the most favorable benefits. Interest rates are low, you have plenty of payback options, and you don’t need exceptional credit to take advantage. You should explore your federal options before you consider any other type of loan. 

First, apply for a federal student loan by filling out a Free Application for Federal Student Aid (FAFSA). This paperwork can put you in touch with grants and other forms of free money. But it’s also your gateway to a federal loan. 

Filling out the FAFSA takes time, and there are plenty of steps. The U.S. Department of Education counts eight of them:

• Sign up. You’ll need a federal student aid identification name, along with a password. It takes about 10 minutes to move through this process. 
• Start the form. The government creates a new one every year. The 2020-2021 version is available now. 
• Provide basic information. You’ll need to offer your name, date of birth, and other personally identifiable information. 
• Identify your school choices. If you’re considering enrollment at many schools, list all of them. If you have your heart set on just one place, name it. 
• Determine your dependency status. You’ll answer questions that help officials understand whether your parents should help you pay for school or whether you’re dealing with this issue alone. 
• Grab your parents. If your parents are responsible for you, they’ll need to provide information about themselves. 
• Offer financial data. You’ll need your tax returns to complete this step. If you did your taxes online, you can link the forms together and save yourself a few keystrokes. 
• Sign and submit. You’ll enter your identification data again as an electronic signature, and then you’re done.

Once your form has been processed, you’ll get a student aid report from the U.S. Department of Education. This is your opportunity to check your entries and amend any errors you see. You won’t know how much financial aid you’ll get, but this form proves that you’ve completed your paperwork and you’re in the pipeline.

Later, you’ll get a financial aid offer from your school. That letter could outline your federal student loan options, but it might also list other things, like the following:

• Scholarships
• Grants 
• Work-study eligibility 
• State government loans 

If you have questions, talk with your school’s loan officer. In general, the U.S. Department of Education recommends that you accept scholarships, grants, and work-study before considering anything else. If you still have tuition needs to fill, consider federal loans.

• What if I Need More Financial Aid? 

Every institution of higher learning comes with a different price tag. Some are more expensive, and others offer great value at a low price. If you can’t cover the cost of tuition, it’s worthwhile to step back and think hard about where you want to go. Is there another school with a lower price and a reputable program? Would going there make school more affordable?

If you’re set on your school, consider a private loan. These do come with some risks. Unlike federal loans, private loans:

• Require good credit. Federal loans are open to everyone. Private versions are different. If you have no credit history or you’ve made bad choices, you might need a cosigner. 
• Can be expensive. Your interest rate could be much higher, compared to a federal loan. And some products come with hidden fees that can add to the overall cost. 
• Aren’t subsidized. Many loans for undergraduates are attached to financial need . Meet the requirements, and the government will cover interest payments while you’re in school.

Private student loans are offered by private lenders, like banks and credit unions. The financial institution your parents use might have a loan that’s just right for you. A quick internet search can help you find dozens more options you can use to compare and contrast.

If you feel comfortable with money and you’re aware of financial terminology, you can make a smart decision on your own. But if you’re not sure what’s the right product and what’s a dud, don’t be afraid to ask for help.

• How Do Student Loans Work in Repayment? 

When you sign loan documents, you agree to pay back the money you borrowed. But what happens when the monthly payment comes due, and you don’t have enough to make each payment? 

About 40% of college students will default on their loans by 2023, reporters say. While pundits and experts argue about how to solve the student loan crisis, smart shoppers think hard about their decisions before they sign their loan documents. 

To avoid financial ruin, answer these questions before you sign:

• How much do you really need? Never borrow more than you need to cover your expenses. Take the smallest loan you can. 
• Can I meet the repayment requirements? Talk with your counselor and understand what your first paycheck will look like. After paying for your loan, can you still afford rent and food? Is there a grace period before payments start?
• How do student loans work if I get into trouble? Is your loan servicer willing to work with you if things go wrong and you can’t make your payments? Is an income-driven repayment plan an option? What about consolidation loans?
• Do you understand the terms and conditions? Are you clear on how much you will pay? Is this a subsidized loan, where interest isn’t accrued while you’re in school? What happens if you pay early? Make sure everything is clear to you. 
• How Do Student Loans Work with Taxes?

While you’re paying back your student loan, you can deduct the interest . The maximum deduction is $2,500, which isn’t a huge amount, but it’s enough to push some people into refund territory. 

But your student loans can be a tax burden in a few special circumstances:

• Your employer pays the bill. If you’re participating in an educational assistance program or a loan repayment program, you’ll pay taxes on benefits bigger than $5,250.
• You’re a student athlete. The portion of your scholarship that covers room, board, and stipends is taxable. 
• You’re participating in federal work-study programs. Any money you get through your work is taxable, and your school will give you a form to use for accounting. 
• You’ve settled your debt. Whether you have a federal loan balance that’s been forgiven or a private loan you liquidated in court, any difference between what you owed and what you paid is taxable. 
• How Do Student Loans Work for You?

Reading through all of these rules and regulations can be exhausting, but you can move through the student loan process with a little help. Ask your loan officer. Talk with your parents. With help, you can make the right decisions.

Table of contents

Related articles.

Where to Find the Best Scholarships for College Freshmen

Learn about scholarship opportunities for college freshmen and where you can find them.

How to Apply for College Scholarships

College scholarships can help reduce educational expenses. Learn how to find college scholarships and get tips for submitting a winning application.

The Best College Scholarships for High School Students

Here are some of the best college scholarships for high school students and where you can find more helpful resources regarding college finances.

Student loans

The right student loans for bright futures.

Everyone deserves a chance at a brighter future. Apply for a student loan and get started on your journey.

Cosign a student loan application

Check student loan application status

Student loans  built with you in mind

We provide you with a number of different paths to get you started on your educational journey. All you have  to do is choose the right one for you.

Fixed rates:  4.50% APR footnote 1  – 15.49% APR footnote 1

Variable rates: 6.37% APR footnote 1  – 16.70% APR footnote 1

For college students earning a bachelor's or associate's degree, or a certificate at a degree-granting school.

Lowest rates shown include the auto debit discount.

Fixed rates:  4.50% APR footnote 2  – 15.69% APR footnote 2

Variable rates: 6.37% APR footnote 2  – 16.78% APR footnote 2

For students taking professional training or certificate courses (such as culinary, aviation, technical, etc.).

For graduate students seeking loans for medical, dental, health professions, MBA, law, and master's/doctorate degree expenses. Rates vary by loan.

See all private student loans

Adding a cosigner may strengthen your student loan application

If you have little or no credit history, consider a cosigner. Last year, students were 3x more likely to be approved for a student loan with one! footnote 3 Last year, 87% of Sallie Mae undergraduate loans were cosigned footnote 4  and it may help you get a better interest rate on your student loan.

The help you need now, and   throughout the school year

Cover up to 100% of school-certified costs footnote 5, multiple ways to repay, zero origination fees.

Make college your focus

Save time—apply for a student loan once to get money for the whole year so you can focus on studying. And if your plans change, no worries—interest on your loan won't be charged until the money is sent to your school.

Higher education comes with some  college costs —bigger ones, like tuition and housing, and smaller ones, like books and a laptop. We can help you get the money you need for school. footnote 5

Take comfort , Get covered

Our multi-year advantage means you can get the money you need year after year. 97% of students who’ve been approved with a cosigner were approved again when they returned with a cosigner the following year. footnote 6 Plus, you’ll get the convenience of a faster student loan application and managing all your private student loans with one lender. Need help? Our 100% U.S.-based customer service team is here for you. 

Paying back comes with benefits

Our multiple student loan repayment options on college loans give you more flexibility on how you can pay them back. Plus, you'll get free access to your FICO® score , which is updated quarterly online. footnote 7 Our loans for college students have no origination fees and provide competitive interest rates. Plus, you get a 0.25 percentage point interest rate discount when you enroll in and make monthly student loan payments using auto debit. footnote 8

A student loan that gives you more

See how sallie mae compares to other lenders.

Footnotes only apply to Sallie Mae loans

Some frequently asked questions about student loans

What’s a private student loan.

A student loan is money that’s loaned to you by a bank or other financial institution to help pay for your education. All loans need to be paid back. When you pay back loans for school, your repayment amount includes the full amount you borrowed, plus interest (the amount your lender charges you for borrowing the money).

What types of student loans are available?

There are school loans available for students in undergraduate, graduate, certificate, dental, medical, and health professions programs. Sallie Mae also offers student loans for graduates studying for the bar exam or relocating for medical and dental residencies. 

Private loans for college—offered by banks like Sallie Mae, credit unions, and other financial institutions—are based on your creditworthiness. This means your lender will check to see if you have a history of borrowing money and paying it back on time. Since many students haven't had time to  build credit , applying for a private student loan with a cosigner—a parent, relative, or other adult with good credit—may increase your chances for approval and help get you a better rate.

How much can you get in private student loans?

For private student loans in general, you may be approved to borrow up to 100% of your school-certified costs for the entire year, if needed.

You should borrow only what you can afford to pay back later. Consider how much you may earn in your future career. Use a responsible borrowing approach. Use free money first and explore federal loans before considering private student loans. To help estimate your future income potential, you can visit the US Department of Labor at  bls.gov.

How do you apply for a private student loan?

You can fill out a student loan application right on the lender’s website. There’s no cost to apply. You’ll be asked to enter some basic personal and financial information, and choose the type of interest rate  and repayment plan you want for your loan. If you’re applying with a cosigner, they’ll also need to provide their financial info. 

What can college student loans be used for?

You can use student loan funds to cover any of your school costs included in your school's cost of attendance for the year, which might include the following for students attending school at least half time:

• Travel to and from school
• Equipment, supplies, and tools

How long do you have to pay off private student loans?

Repayment terms vary by lender. Because more interest gets added to your loan balance over time, you may be able to save money by paying off your loan sooner.

Use our Accrued Interest Calculator to see how much you can save by paying more towards your loan.

Does applying for private student loans affect my credit score?

Yes, it may. Your lender will need to run a credit check to see if you qualify for the college loan, which may impact your credit score.

What are the benefits of a cosigner?

You may boost your chances of being approved by adding a cosigner (such as a parent, relative, or other responsible adult). Last year, 87% of Sallie Mae undergraduate loans were cosigned. footnote 4

What’s the difference between a fixed and variable rate?

A fixed rate is one that doesn’t change over the life of your loan, so your monthly payment stays the same. A variable interest rate can go up or down with the market, increasing or lowering your monthly payment as it does.

Illuminating your path to higher education

Understand student loans and borrowing  

Use the student loan repayment calculator  

Explore the College Planning Calculator SM

footnote Borrow responsibly We encourage students and families to start with savings, grants, scholarships, and federal student loans to pay for college. Students and families should evaluate all anticipated monthly loan payments, and how much the student expects to earn in the future, before considering a private student loan.

footnote Undergraduate and Graduate School loans are for students at participating degree-granting schools. Career training student loans are for students at participating non-degree-granting schools. Smart Option Student Loan information is for undergraduates only. Graduate Certificate/Continuing Education coursework is not eligible for MBA, Medical, Dental, and Law School Loans. Students who are not U.S. citizens or U.S. permanent residents must reside in the U.S., attend a participating school in the U.S., apply with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and provide an unexpired government-issued photo ID to verify their identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.

footnote 1. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent.  Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.

footnote 2. Advertised APRs for career training students assume a $10,000 loan to a student who attends school for 2 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent.  Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.

footnote 3. Based on the percentage of borrowers who were approved for a Sallie Mae loan with a cosigner compared to the percentage of borrowers who were approved for a Sallie Mae loan without a cosigner from October 1, 2021 through September 30, 2022.

footnote 4. Based on approved Sallie Mae loans to undergraduate students from October 1, 2021 through September 30, 2022.

footnote 5. For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website may be subjected to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time.

footnote 6. Sallie Mae loans cover enrollment periods of up to 12 months. Students must apply for a new loan each school year. This approval percentage is based on students who were approved for a Sallie Mae undergraduate or graduate school loan in the 2020/21 school year and were approved for another Sallie Mae undergraduate or graduate loan when they returned with the same or new cosigner in 2021/22. It does not include the denied applications of students who were ultimately approved in 2021/22.

footnote 7. Borrowers and cosigners with an available FICO® Score and a Sallie Mae-serviced loan with a current balance greater than $0, may receive their score monthly after the first loan disbursement. The FICO® Score provided to you is the FICO® Score 8 based on TransUnion data. FICO® Scores and associated educational content are provided solely for your own non-commercial personal review, use and benefit. This benefit may change or end in the future. FICO® is a registered trademark of the Fair Isaac Corporation in the United States and other countries. 

footnote 8. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. 

footnote 9. GRP allows interest-only payments for the initial 12-month period of repayment when the loan would normally begin requiring full principal and interest payments or during the 12-month period after GRP request is granted, whichever is later. At the time of GRP request, the loan must be current. The borrower may request GRP only during the six billing periods immediately preceding and the twelve billing periods immediately after the loan would normally begin requiring full principal and interest payments. GRP does not extend the loan term. If approved for GRP, the Current Amount Due that is required to be paid each month after the GRP ends will be higher than it otherwise would have been without GRP, and the total loan cost will increase.

footnote 10. Advertised APRs for Graduate School Loan, MBA Loans, and Graduate School Loan for Health Professions  assume a $10,000 loan with a 1-year in-school period. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent.  Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.

footnote Sallie Mae loans are made by Sallie Mae Bank.

footnote Information advertised valid as of 3/25/2024.

footnote SALLIE MAE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, SERVICES, AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK  SALLIEMAE.COM  FOR THE MOST UP-TO-DATE PRODUCT INFORMATION.

Some student-loan borrowers have just 1 month left to get closer to debt cancellation — and they need to take action

• Some student-loan borrowers have one month left to benefit from one-time account adjustments.
• Borrowers who do not have qualifying loans need to consolidate by April 30.
• The Education Department expects to complete account adjustments in July.

Some student-loan borrowers have just one month to get closer to debt relief.

President Joe Biden's Education Department is nearing the end of its one-time account adjustment for borrowers on income-driven repayment plans and Public Service Loan Forgiveness.

First implemented last summer, the adjustment allowed the department to evaluate borrowers' accounts every other month to determine which borrowers qualified for debt relief but had yet to receive it. The department said it expects adjustments to be completed by July 1 — and while it happens automatically for some borrowers, others will need to take action soon to benefit from the temporary provision.

Related stories

To benefit from the adjustment, borrowers must be in the federal direct loan program or the Federal Family Education Loan program with government-held loans. The department recommends that For those without qualifying loans apply to consolidate into one of the programs by April 30.

"In general, it takes at least 60 days to process a direct consolidation loan application and to disburse the new loan," the department's guidance said.

The Consumer Financial Protection Bureau also released an advisory in early March reminding borrowers of the consolidation deadline. It said that borrowers with the following federal loans will need to consolidate to benefit from the adjustment:

Commercially held FFEL loans

Parent PLUS loans

Perkins loans

Health Education Assistance Loan Program loans

To consolidate, borrowers can go to studentaid.gov/loan-consolidation .

In August, the Education Department wiped out $39 billion in student debt for 800,000 borrowers — the first group to see relief through the account adjustment. Since then, the department has continued to enact targeted relief for borrowers due to the reform, most recently forgiving $5 billion in student loans for 74,000 borrowers through the adjustment.

At the same time, the Education Department is rolling out a range of efforts intended to ease repayment for borrowers. Through its new SAVE income-driven repayment plan, 153,000 borrowers were recently approved for $1.2 billion in relief — a result of a SAVE provision that allows borrowers who originally borrowed $12,000 or less to get relief with as few as 10 years of qualifying payments.

However, the future of SAVE is uncertain, given a new lawsuit from 11 GOP state attorneys general to block the program and prevent relief from reaching borrowers. An Education Department official told Business Insider it "won't stop fighting to provide support and relief to borrowers across the country — no matter how many times Republican elected officials try to stop us."

Watch: Why student loans aren't canceled, and what Biden's going to do about it

• Main content