Materials gathered for a student loan application

Demystifying Student Loans: A Beginner’s Guide 

As the cost of higher education soars, college students and their parents are relying more and more on student loans to finance their studies. Student loans are a type of financial aid provided by the government or private lenders to help students pay for tuition fees, accommodation, and living expenses while studying. You are loaned the money to enroll in classes but once you get your degree or drop below a full-time student, you will be expected to begin paying back the money you borrowed plus interest. In this blog, we will discuss the different types of loans available, eligibility criteria, and repayment options. 

Types of Student Loans 

There are two main types of student loans available: federal and private. Federal student loans are provided by the US government, while private loans are offered by banks, credit unions, and other financial institutions. 

Federal Student Loans 

Federal loans are the most popular type of loan because they are typically more affordable and offer flexibility in repayment options. There are three types of federal student loans: 

  • Direct Subsidized Loans – These loans are available to undergraduate students who demonstrate financial need. The government pays the interest on these loans while the student is still in school. 
  • Direct Unsubsidized Loans – These loans are available to both undergraduate and graduate students, regardless of financial need. Interest accrues on these loans from the time they are disbursed. 
  • Direct PLUS Loans – These loans are available to graduate students and parents of undergraduate students. They require a credit check and can cover the full cost of attendance, minus any other financial aid received. 

Private Student Loans 

Private loans are typically more expensive than their federal counterparts and require a credit check. However, they may be necessary for students who have already maxed out their federal loan options or have unique circumstances that make them ineligible for federal aid. 

Eligibility Criteria 

To qualify for federal student loans, you must be a US citizen or eligible non-citizen, enrolled at least half-time in an accredited program, and maintain satisfactory academic progress. To apply, you must fill out the Free Application for Federal Student Aid (FAFSA). 

Private student loan eligibility criteria will vary from lender to lender. These loans generally require good credit and a co-signer if the borrower has little or no credit history. 

Repayment Options 

Federal student loans offer several repayment options, including standard, extended, graduated, income-driven, and pay-as-you-earn plans. Some plans are based on income and can be adjusted to fit the borrower’s financial situation. Private student loans typically offer fewer repayment options and may have higher interest rates. 


Before applying, it’s important to consider a few key factors. First, assess your financial situation and determine if taking out loans is necessary. Be sure that you have applied for all the scholarship resources that you qualify for as these do not require repayment. Then, consider how much you’ll need to borrow, and don’t take out more than necessary. Additionally,  understand the repayment process, check for hidden fees, and create a plan for paying back your loans after graduation. Finally, remember that loans are a financial commitment that will impact your future, so make sure to weigh the benefits and risks carefully before making any decisions. 


Loans can be a great resource for students looking to obtain a college degree. Before you apply, be sure to understand the various types of loans that you are eligible for, in addition to the application and repayment process. If you have further questions about student loans, contact the financial experts at Tostrud and Temp. Our certified public accountants have worked with hundreds of people like you offering service and support that meets your individual needs.