Every year, submitting the FAFSA is the first step in the financial aid process. The FAFSA determines your eligibility for federal, state, and college-sponsored financial aid. The FAFSA opens Oct. 1.

Step 2: Free Money

Look for grants, scholarships, and work-study opportunities which do not have to be repaid. These sources of financial aid can reduce the amount you will have to borrow or pay out of pocket.

Step 3: Federal Student Loans

If you need additional funding after exhausting grants, scholarships, and work-study, consider federal student loans. Federal loans come with fixed interest rates and flexible repayment options.

Step 4: Private Student Loans

If federal student loans don't cover the entire cost of attendance, private student loans can be used as a supplement. Sparrow's search engine allows you to compare loan terms before borrowing.

Types of student loans

1Federal student loans

Federal student loans are loans provided by the U.S. government to help students pay for their education. Most federal student loans are available to students regardless of credit score and income, and have flexible repayment options. To apply for federal student loans, fill out the Free Application for Federal Student Aid (FAFSA).

Direct Subsidized Loans are a type of federal student loan designed to help undergraduate students with financial need pay for college expenses.

Direct Subsidized Loans are unique in that the government pays the interest on the loan while you are in school at least half-time, during the grace period, and during any deferment periods. This makes Direct Subsidized Loans an affordable option, as they will accrue less interest over time compared to other types of student loans.

More: The difference between subsidized and unsubsidized loans.

Direct Unsubsidized Loans are a type of federal student loan available to undergraduate and graduate students, regardless of financial need.

Unlike Direct Subsidized Loans, the government does not pay the interest on Direct Unsubsidized Loans while you are is in school or during deferment periods. You are responsible for paying the interest that accrues on the loan. You can choose to pay the interest as it accrues, or you can allow it to accumulate and be capitalized (added to the loan balance), increasing the total amount to be repaid.

More: The difference between subsidized and unsubsidized loans.

Parent PLUS loans are a type of federal student loan designed to help parents pay for their children’s undergraduate education, regardless of the family’s financial need. Parent PLUS loans are available to undergraduate students who have exhausted their federal student loan eligibility under other loan programs, such as Direct Subsidized and Unsubsidized Loans.

Compared to Direct Subsidized and Unsubsidized Loans, parent PLUS loans have higher interest rates and less flexible repayment options. Parent Plus loans also have higher borrowing limits — parents can borrow the full cost of attendance, minus any other financial aid received.

More: Everything you need to know about parent PLUS loans.

Grad PLUS loans are a type of federal student loan designed to help graduate and professional students pay for their education. Grad PLUS loans are available to graduate and professional students who have exhausted their federal student loan eligibility under other loan programs.

Compared to Direct Subsidized and Unsubsidized Loans, grad PLUS loans have higher interest rates and less flexible repayment options. Grad Plus loans also have higher borrowing limits — you can borrow the full cost of attendance, minus any other financial aid received.

More: Everything you need to know about grad PLUS loans.

Perkins Loans are a type of federal student loan, specifically for undergraduate and graduate students with exceptional financial need. These loans are provided by the school and have a low interest rate, with a maximum amount that can be borrowed annually based on the student’s financial need, cost of attendance, and other financial aid received. Perkins Loans also offer loan cancellation benefits for certain professions such as teachers and public servants.

The authority for schools to make new Federal Perkins Loans ended on Sept. 30, 2017.

2Private student loans

Private student loans are provided by private lenders, such as banks, credit unions, and state agencies. These loans are typically used to fill the gap between the cost of attendance and other forms of financial aid received, such as scholarships, grants, and federal student loans. Private student loans usually require you to have a strong income and high credit score. A co-signer can help you qualify; that person will be responsible for the loan if you can’t pay it back.

An undergraduate private student loan is a type of loan that is offered by private lenders, such as banks or financial institutions, to help students pay for their college education after exhausting all other federal aid. These loans typically have different interest rates, repayment terms, and requirements than federal student loans, and often require a credit check and a cosigner.

More: Best private student loans for undergraduate students.

A graduate private student loan is a type of loan that is specifically designed for students pursuing a graduate or professional degree, such as a master’s or doctorate. These loans are offered by private lenders, such as banks or financial institutions, and typically have different interest rates, repayment terms, and requirements than federal student loans, and may require a credit check and a cosigner.

More: Best private student loans for graduate students.

Students who aren’t United States citizens generally won’t qualify for federal student loans (unless you’re an eligible noncitizen). An international private student loan is a type of loan offered by private lenders to help international students pay for their education in the United States. These loans typically have different requirements and terms than loans for domestic students, and may require a creditworthy cosigner or additional documentation to be eligible.

More: Best private student loans for international students.

Most federal student loans do not require a credit check, which makes them an attractive option for most students. If you require additional funding for your education, there are a few private lenders who provide loans specifically to borrowers with poor credit. These lenders will determine your eligibility based on additional factors such as where you go to school, what you’re studying, and your earning potential.

More: Best private student loans for students with bad credit.

The majority of undergraduate private student loans — over 90% — have a cosigner. A cosigner can help you get approved for a loan and get a lower interest rate. But if you don’t have a cosigner, don’t worry. There are a few lenders that assess your eligibility according to factors beyond credit history, making it more likely you’ll qualify on your own.

More: Best private student loans for students without a cosigner.

A parent loan is a loan for parents, guardians, or sponsors to help cover the cost of a student’s education. It differs from a cosigned loan because only the parent (not the student) is responsible for paying it back.

Parent loans tend to have higher interest rates than traditional student loans. However, parent loans can also come with higher borrowing limits, which could come in handy if the student is attending an expensive school and needs more financial aid than the US government offers. Parents with a strong financial profile (high income and strong credit score) may be able to qualify for an interest rate that’s lower than a federal parent PLUS loan by cosigning a private loan or taking out a private parent loan.

More: Best parent loans.

Medical student loans are a type of loan specifically designed for students who are pursuing a career in medicine, such as becoming a doctor, nurse, or other healthcare professional. Medical students with good credit may be able to get a lower interest rates through private student loans rather than federal loans.

But, if you work at a nonprofit hospital after graduation, you won’t be able to get your private student loan forgiven. With a federal student loan, you would be eligible for loan forgiveness through through the federal Public Service Loan Forgiveness (PSLF) program.

More: Best student loans for medical school.

Law school student loans are loans designed specifically to help law students pay for their education. These loans are offered by private lenders and typically have variable or fixed interest rates, as well as different repayment options than federal student loans. To qualify for a private law school student loan, the borrower typically needs to have a strong credit history or a cosigner with good credit.

More: Best student loans for law school.

Dental school student loans are loans designed specifically to help dental students pay for their education. Dental students may also consider alternative financing options such as scholarships, grants, and work-study programs to help pay for their education.

More: Best student loans for dental school.

3Student loan refinancing

After you graduate and have shown responsible payment history, you may be able to refinance student loans. That’s when a private lender pays off your loans and gives you a new repayment schedule and lower interest rate. Generally, you need a credit score of 650 or higher to refinance. If you refinance federal student loans, you’ll lose federal loan protections and benefits.

Federal student loan refinancing is when a private lender pays off your existing federal loans and offers you a new loan with better terms. In order to refinance, you typically need a high credit score (690 or higher) and strong income.

Note: If you refinance federal student loans, you lose access to federal loan benefits such as income-driven repayment plans, loan forgiveness programs, and forbearance options.

More: Pros and cons of refinancing federal student loans.

Private student loan refinancing is when a private lender pays off your existing private loans and offers you a new loan with better terms. To be eligible for refinancing, a high credit score (690 or above) and stable income are usually required.

Unlike refinancing federal student loans (which causes you to lose of federal student loan benefits), there is no downside to refinancing private student loans. Refinancing private student loans is a great way to:

1.) Get a lower monthly payment, freeing up cash for other expenses.

2.) Pay off your loan faster, saving you money in interest.

3.) Lower your monthly payment in order to decrease your debt-to-income ratio, which can make it easier to qualify for a mortgage or other large purchase.

More: Best student loan refinance rates.

Medical student loan refinancing is available during and after residency. Some lenders have student loan refinancing programs specifically for medical residents, which could make your monthly payment or interest rate cheaper.

Note: If you refinance federal student loans, you lose access to federal loan benefits such as income-driven repayment plans, loan forgiveness programs, and forbearance options.

More: A complete guide to refinancing medical school loans.

Ultimate Guide to the FAFSA

See how to qualify for federal student aid to help pay for college.

See how to navigate FAFSA

Ultimate Guide to Student Loans

Everything you need to know about student loans before you borrow.

Learn about all things student loans

Ultimate Guide to Private Student Loans

A step-by-step breakdown to ensure you're getting the right private student loan.

Find the right private student loans

Ultimate Guide to Refinancing

Learn about how refinancing works and when you might want to do it.