Student Loan Eligibility: Private and Federal Loans

BIG Ideas:

• Student loan eligibility varies by lender and loan type, so it’s important to understand your options early in your college planning process.
• Federal loans can be easier to qualify for and offer protections that most private loans don’t, so it’s a good idea to exhaust them first.
• Private loans can help bridge college funding gaps but often require solid credit, steady income, and a co-signer.

College is the plan. You’ve probably known that for a while. What may not be as clear, at least at this stage, is how you will afford it.

Along with buying a home, a college education may be one of the biggest investments you’ll make in your lifetime. And chances are, you’ll need help paying for it. For many students and families, that help comes in the form of student loans, which can make paying those tuition bills a whole lot easier.

But to get those loans, you’ll need to know a few important things, starting with whether you’re eligible to borrow. Because student loan eligibility requirements can vary significantly from loan to loan and lender to lender, it’s important to understand the types of student loans.

Understanding the Types of Student Loans

There are two types of student loans – federal student loans and private student loans. Federal loans are offered by the U.S. Department of Education (the government), while private students loans are offered by non-government lenders, like banks, credit unions, or non-profits.

Let’s take a closer look at each type of student loan and how it affects your eligibility.

Subsidized vs. Unsubsidized Federal Student Loans

There are two types of federal student loans: subsidized and unsubsidized.

• Subsidized loans are based on financial need and are available to undergraduate students. With these loans, the government pays the interest:
  • while you are in school at least half-time,
  • for the first six months after you leave school, and
  • during any deferment period when loan payments are postponed.

• Unsubsidized loans are not based on financial need and are available to undergraduate, graduate and professional students. With these loans, you are responsible for all interest from the moment the loan is disbursed. This means that if you don’t pay the interest while in school, it will continue to accrue and be added to your loan balance, raising the total cost of the loan.

  To be eligible for either type of federal student loan, you must complete the FAFSA and meet the basic federal aid requirements, including being enrolled in school at least half-time.

Basic Federal Student Loan Eligibility Criteria

There are some basic requirements you must meet to be eligible for federal student loans. According to the Federal Student Aid website, you must:

• be a U.S. citizen or eligible non-citizen,
• have a valid Social Security number,
• be enrolled or accepted as a regular student in an eligible degree or certificate program,
• meet your school’s standard for satisfactory academic progress, and
• prove that you’re qualified to obtain a college or career school education.

Of course, you’ll also need to complete the Free Application for Federal Student Aid (the FAFSA).

For many students and families, federal student loans alone aren’t enough to cover the full cost of college. With college costs continuing to rise and the annual and lifetime borrowing limits introduced by the One Big Beautiful Bill Act (OBBBA), many students and parents turn to private student loans to help cover remaining expenses. Let’s take a closer look at private student loans and what it takes to qualify.

Private Student Loan Eligibility

Private student loans can play an important role in covering college costs, but interest rates, repayment options and eligibility requirements can vary widely from lender to lender, so it’s important to compare your options before applying.

To be eligible for a private student loan you usually need:

• a strong credit score,
• steady income, and
• proof of enrollment in eligible degree program.

If you’re a student applying for a private student loan, you may not have established credit or a steady income. In that case, adding a co-signer, like a parent or guardian, can be key to qualifying for a private student loan.

Are Federal or Private Student Loans Better for Me?

Now that you understand basic eligibility requirements, you may be wondering which student loan option is right for you.

While everyone’s situation is unique, it’s usually best to exhaust federal financial aid first, because federal student loans offer valuable benefits, including access to public service loan forgiveness and fixed interest rates that are often lower than private loan options.

If you find that federal aid alone isn’t enough to cover the cost of college, private student loans can help fill the gap that’s left.

No matter which option you choose, remember to only borrow what you need so you’re not left with unnecessary debt after graduation. Learn more with these private loan borrowing tips. 

Brazos Can Help You Make Your College Plan Possible

For more than 40 years, Brazos Higher Education has helped students and parents finance the cost of college. As a Texas nonprofit, we offer competitive rates on private student loans that can help you fill the gap where federal aid and your savings leave off. Contact us today.