How to get a student loan for college or grad school

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Getting a student loan for college often starts before acceptance letters even go out.

• Student loans may seem complicated, but a step-by-step guide can help demystify the process.
• The first step to getting a federal student loan is filling out the Free Application for Federal Student Aid (FAFSA), which uses income information to determine how much a student or their family can afford to contribute to college.
• Up to 10 schools will receive a student's FAFSA and determine whether there is a need for financial aid. Aid award letters are sent out in the spring alongside college acceptance letters.
• If a student doesn't qualify for need-based federal loans or needs more money than the government is able to provide, they may supplement the cost with private student loans.
• The US Department of Education recommends accepting any free government money (scholarships, grants, and work-study opportunities) before taking on a federal student loan or private student loan.
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Student loans are a complicated beast.

Considering some 44 million American borrowers carry over $1.5 trillion in student-loan debt, one may assume it's easy to get a student loan, but the reality is quite contrary.

Securing a student loan is a lengthy process that often begins before a college acceptance letter even lands in the mailbox. Keep reading for the step-by-step process.

How to get a student loan

1. Understand the types of student loans

The specifics around student loans can be complex, but the first thing to understand is that there are two main types: federal and private. Federal student loans are offered by the US government, while private student loans are issued by a bank or other financial institution.

Federal student loans typically offer better terms than private student loans, and are either subsidized (these include a "grace period" where interest doesn't accrue) or unsubsidized. If you're expecting to need financial aid to pay for college, it's best to start by applying at the federal level.

2. Gather documents you'll need for the FAFSA

The Free Application for Federal Student Aid (FAFSA) is your first step to getting a federal student loan, grant, scholarship, or work-study opportunity. Whether you're a prospective or current undergraduate or graduate student, the application must be filled out each year in which you're applying for aid.

The application to get financial aid for the 2019-2020 school year opened on October 1, 2018 and closes on June 30, 2019. To complete the application, you'll need your Social Security number and/or driver's license number, plus a whole bunch of bank statements, tax returns, and income information.

Gathering all the necessary information ahead of time can speed up the actual application process, which takes about 30 minutes, on average. Nerdwallet has a handy list of every document you'll need.

An online platform called Frank can also help streamline the process. The startup works with students to complete the FAFSA in as little as four minutes, for free. There's also a $19.90-a-month membership option that provides a financial support team and access to a cash advance before your loan kicks in.

3. Make a list of schools

If it's your first time filling out the FAFSA as a prospective student, make a list of up to 10 schools that you want to receive your FAFSA application. If you're applying online, you can search for the school codes through the application.

Paper applicants can send their FAFSA to up to four schools. School codes are available on the federal student aid website.

4. Check if any of the schools require a separate financial aid application

Some colleges have their own financial aid applications, so be sure to check with each school on your list and follow any additional instructions for applying for aid.

5. Submit your FAFSA and review your Student Aid Report

Within three weeks of submitting your FAFSA, you'll receive a report by email or paper mail detailing what you provided on your application. Check the Student Aid Report to make sure all the information is correct. If there any mistakes, log in to your account using the Federal Student Aid (FSA) ID you created during the application process and fix them as soon as possible.

The Student Aid Report will also list your "expected family contribution" - the government's estimation of how much money your family can be expected to pay toward college based on the income data provided in the application. This will help colleges determine your eligibility for need-based financial aid.

6. Start researching private student loans

The amount a student can borrow through federal student loans is limited depending on the type of loan, year in school, and dependency status.

The total lifetime maximum amount of federal loans a dependent undergraduate student can take on is $31,000, but no more than $23,000 can be subsidized. The maximum amount an independent undergrad can take on is $57,500, with the same $23,000 cap on subsidized loans. Graduate and professional students can take on a lifetime total of $138,500 in federal student loans, but no more than $65,500 can be subsidized.

Most students won't receive the full possible amount of federal loans and turn to private lenders to fill the gaps. Unlike government student loans, private loans require credit history or a co-signer to obtain. You can use a site like LendingTree to find out which loans you may qualify for and compare different lenders, or go directly to online lenders like SoFi .

7. Look for financial aid award letters in the spring

Financial aid award letters start arriving in the spring alongside college acceptance letters and outline exactly which scholarships, grants, work-study programs, and federal student loans a student has qualified for and how much it's worth.

8. Accept any free money before the loan

The rule of thumb from the US Department of Education's Federal Student Aid office is to first accept any free aid you're offered, including scholarships and grants, and work-study opportunities.

After that, it's best practice to accept an offer for a subsidized student loan before an unsubsidized loan. A subsidized loan gives the borrower a grace period to repay the loan, usually lasting until they're out of school, and doesn't accrue interest during this time.

If the amount offered from the federal lenders won't make up for the gap in what you can afford out-of-pocket, it may be time to consider a lower-cost college or a private student loan.

9. Sign a promissory note

The aid offer letter will detail exactly how to accept the federal loan you've been offered, and you can even accept a partial amount if you want.

If you're getting a direct loan from the US Department of Education, you'll have to sign a contract called the master promissory note, which also includes information about how interest is calculated, when it's charged, available repayment plans, and deferment and cancellation rules.

10. Complete entrance counseling

If it's your first time accepting a federal student loan, you'll be required to complete entrance counseling to prove your understanding of the loan terms and process, what other financial aid options are available to you, and your rights and responsibilities as a borrower.

The school may direct you to the Federal Student Aid office's entrance counseling class, which takes about 30 minutes to complete, or offer their own in-person or online program.

11. Receive your loan

The school will be in charge of applying your loan money to tuition, books and supplies, and room and board through a process called disbursement. Each time the school disburses funds from your loan, you'll be notified.

Once your obligatory costs are covered, any loan money left over will be credited to you by the school's financial aid office. If you find you're able to pay out-of-pocket at any point and don't need the loan money, you can cancel the loan amount within 120 days with no interest charges or fees.

• Read more about student loans and paying back debt:
• How to pay off student loans faster
• How to pay back student loans
• Pay debt or save for retirement
• Which debt to pay off first

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