A Complete and Comprehensive Guide to the Student Loan Process

Will I Need a Student Loan? How Much Will I Need?

Financing a college education can seem overwhelming, especially if you’re sending your first child off to campus or this is your first time exploring the concepts of financial aid, federal grants, work-study, or the student loan process

Start with FAFSA

To apply for need-based aid, your first step will be to complete and submit a FAFSA application (Free Application for Federal Student Aid).  With this one form, a student can apply for aid from the federal and state government, as well as financial aid from public and private universities.  Some private colleges will have you fill out additional forms, most likely a CSS/Financial Aid PROFILE form.

Students will then receive a financial aid award letter which outlines the types of aid he or she has received and the amount being offered.  This will include gift aid, such as scholarships or grants from the college or university, and opportunities for self-help aid, like work-study programs.


If Financial Aid Doesn’t Cover the Total Cost, What’s My Next Move?

Your financial aid award will help you determine the “net price” of higher education, or what you’ll be expected to pay.  Net price is determined by taking the college’s cost of attendance (tuition, housing, meals, etc.) and subtracts the gift aid a student has received (grants and scholarships).  What’s remaining will need to be paid for through your savings, income, or, ultimately, student loans.

Calculating Your Needs

One of the biggest questions you face is how much money will you need to borrow to cover the remaining education costs? FAFSA4caster, from the U.S. Department of Education, is a financial calculator you can use to estimate your eligibility for federal aid and help you plan ahead for college.

Another helpful tool is the student loan calculator provided by FinAid.org. It takes into account family contributions, whether you’re working during the semester, and how long you plan to attend college, and determines how much you really need to borrow

Beyond these tools, most colleges have a page on their website that breaks down the cost of attending. As an example, Millersville University, a local 4-year public university, shares a “Paying for Millersville” page.

Remember, your student loans may not be covering tuition and room/board alone. Can you pay for your textbooks? Other school materials? Transportation? Homework access codes? If you can pay for these items on your own, by all means, do it! Student loans are not “free money” and you will need to pay them back, plus interest, eventually. Your loans are not meant for entertainment purposes; tuition and school related expenses only.

What Are My Student Loan Options?

To cover the remaining net price of the college or university, you’ll want to start investigating different types of student loans.  The student loan process is divided into two categories- Federal Loans and Private Loans.

Federal loans you may be familiar with are:

  • Perkins
  • Stafford
  • GradPlus (for graduate and professional students)
  • PLUS  (for parents)
  • Consolidation

Popular private loan companies include:

How Do Federal Loans and Private Loans Differ?

In most instances, federal student loans cost less and are easier to repay.  Federal loans also have fixed interest rates, making it easier to plan for repayment, as monthly installments will remain the same.  It’s important to know that federal student loan rates can change, but once a student is awarded a loan, the rate is locked in.  Additionally, federal loans can be subsidized, based on an individual’s needs.  With a subsidized loan, the government pays the interest on the loan while the student is still in school, helping to reduce a student’s debt upon graduation.

Private loans also have their advantages, the strongest being that you can borrow larger amounts of money.  While interest rates may be higher on private loans, you also have the opportunity to shop around, and with a history of good credit, you can find lower interest options.  But remember that the interest rate on a private loan can change at any time until the loan is repaid.

Check out our infographic for a bigger picture on the advantages and differences between these two types of student loans.


I Graduated! Now What?

First of all, congratulations! Graduating from college leaves you with a sense of accomplishment and relief knowing that late night study sessions and term papers are a thing of the past. Don’t ruin your state of euphoria by fretting over your student loans. By approaching those inevitable payments intelligently, with a clear plan, you can focus on a student loan-free future. By creating a plan of action, you can see what needs to be accomplished and determine how to tackle this feat successfully.

Understanding Your Student Loans

The very first thing to verify is the date that you need to start repaying your loans. In most cases, you are given a six-month grace period, which begins the day after you graduate, drop below part-time student status, or withdraw from your program. Generally, your loan servicer should notify you of the date that your first payment is due, but it never hurts to find this out ahead of time!

Another important thing to consider is that lender emails are not junk. In most cases, you can adjust your personal settings on your lender’s website so that you can receive reminder emails for upcoming payments. Your lender will also send out emails with important updates or changes to your loan that you need to be aware of. Be sure to look over any emails from your lenders as a way of staying up-to-date with the status of your student loan repayment.

Unsure which companies you have student loans with? It’s easy to forget these things. Find out the lenders for your student loans by logging on to the National Student Loan Data System (NSLDS) at nslds.ed.gov or by calling the Federal Student Loan Information Center at 800-433-3243.

What Are My Payments Going to Be?

As you come to the final stage of the student loan process, this is probably the number one question on every graduate’s mind. That or “how do I get a job in my field?” This helpful tool estimates what your monthly payments will be. With this information, you can budget for other expenses and develop an answer to the question of ‘expected salary’ on those tedious job applications. Fill in your loan amount, term, and interest rate. The student loan calculator will then estimate what your monthly payments will be.

Making Your First Payment and Beyond

A great way to reduce the stress of impending student loan repayment is to practice making payments towards your student loan before the first payment is due. Take some time to create a budget and include your monthly student loan payment as a line item. Set aside this amount each month into a savings account. That way, once your grace period is over, you’ll be accustomed to making payments already and have a few months’ worth of repayments already saved up.


Checklist for Student Loan Repayment

Sign Up for Auto-Pay

Many student loan servicers will knock 0.25 percentage point off your interest rate if you sign up for auto-pay, and it’ll keep you from missing payments. Plus, if you set your auto-pay to withdraw more than your monthly payment, you can pay off your debt faster. Just check that those extra dollars are going toward your principal balance to maximize savings.

Don’t Ignore It

Whatever you do, do not ignore these bills. Interest will keep collecting and your loan amount will continue to increase, putting you deeper in debt. From there, your credit score will plummet, which can cause even more problems in the future. With federal loans, the government will get their money, by any means possible. Say bye-bye to your tax refunds, your wages might be garnished, your cosigners may face trouble, and you could be sued. Bottom line, DO NOT ignore your student loan payments! You have much healthier options available to you.

Deferment and Forbearance

Your first option is to request a deferment, which is a set period of time in which repayment of the principal and interest of your loan is postponed. In general, deferments are not automatic and you need to specifically request one by contacting your lender. Find out if you qualify for a deferment here.

If you do not qualify for a deferment, another option is to request forbearance. This allows you to either stop making payments or reduce your monthly payment for up to 12 months. Keep in mind that interest will continue to accrue during this period. Just as with deferments, you need to contact your lender to request forbearance. Depending on the situation, documentation may need to be provided to support the necessity of your request.

Apply for Income-Driven Repayment

Income-driven repayment can make your monthly student loan bill more affordable and reduce student loan payments. If you qualify, it’ll cap your payments at a percentage of your income and extend your loan term to 20 or 25 years. And if you’re still on the postgrad job hunt, you may not have to pay anything right away.

In addition to lower payments, any remaining balance at the end of your extended loan term will be discharged — but it will also be taxed as income.

If you’re under an income-driven repayment plan and qualify for Public Service Loan Forgiveness, you can save even more money: After you make qualified payments for 10 years, the remaining balance on your loans will be discharged, tax-free.

You’ll need to reapply each year to stay on your plan, so set a reminder one month beforehand to make sure you don’t miss the deadline.

Look into Refinancing

You can refinance your private student loans with another lender to reduce interest rates. It’s usually best to refinance only private loans so you don’t lose any federal borrower protections, like income-driven repayment or forgiveness programs. To qualify, you’ll need to have a credit score above 650, a steady source of income, and a low debt-to-income ratio.

If your credit score is on the low side, focus on building it by keeping credit card balances at or below 30% of your line of credit and by paying your bills on time.


With a little planning and a firm understanding of the student loan process, you can enter into repayment successfully. Every college offers different types of loan forgiveness, so it is important to research your options! Before paying off your student loans, understand what you’re paying for and remember that there are ways to have your loans forgiven.

What’s your advice about the student loan process? Have you developed a master plan to manage your student loan repayment? What tips do you have? Share your comments with us below!

Kara Vincent
Kara Vincent

Kara Vincent is the Financial Officer at Lancaster Red Rose Credit Union.

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