How to Apply for Federal Student Loans

Abigail Eun
Abigail Eun

Abigail Eun is a freelance writer and personal finance expert. Through diligent research and continuous learning, she has honed her knowledge in budgeting, saving, investing, and debt management. Abigail is passionate about helping people get their finances in order. She believes that everyone should have access to the information they need to make sound financial decisions. Her goal is to provide clear and concise information that is easy to understand.

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September 28, 2022

Borrowing federal student loans is a popular, oftentimes necessary practice to finance the cost of college. In 2022, 43.4 million borrowers carried federal student loans. 

Applying for federal student loans is fairly simple – all you need to do is submit the Free Application for Federal Student Aid, and the U.S. Department of Education determines which federal student loans you qualify for. You only need to submit an individual application outside of the FAFSA if you are applying for federal PLUS loans, which are for parents and graduate students. 

In this article, we’ll cover everything you need to know about applying for and accepting federal student loans. Let’s dive into it. 

Collect Necessary Paperwork

First off, you’ll need to collect the necessary paperwork to fill out your FAFSA. If you are submitting your application as a dependent, you will need your parents’ financial documents. 

  1. Your Social Security Number (never go off memory!)
  2. Your parent(s)’ Social Security Numbers 
  3. Tax Information (ie. Tax Returns, IRS W-2 Parent(s) tax information)
  4. Family income
  5. Records of untaxed income. This includes items such as child support and/or Veteran benefits. (Gather only what applies to you.)
  6. Information on any financial assets your parents have. This includes items such as cash in your checking and/or savings account, investments like stocks and bonds, business assets, mortgages. (Gather only what applies to you.)

Fill out the FAFSA

It is strongly encouraged that you submit your FAFSA as close as you can to the application opening date, which is October 1st. Some financial aid is distributed on a first-come, first-served basis, so submitting the FAFSA as soon as possible will increase your chances of receiving more aid. 

If you are a first-time applicant, you will need to make an account on the Federal Student Aid website. If you are a returning applicant, log into your account. 

It can take anywhere from 45 minutes to 1 hour to fill out the FAFSA if you have all the necessary materials on hand. Try not to rush through the application, as the information needs to be accurate. Fixing your mistakes now will be a lot easier than having to remedy them after submission. 

Double Check Your Student Aid Report

After submitting the FAFSA, you will receive your Student Aid Report (SAR). Your SAR will have all of the information you submitted in your FAFSA, as well as your Expected Family Contribution (EFC). The EFC is how much you and your family are expected to pay out of pocket. 

You will receive your SAR after two weeks of submitting your FAFSA. After receiving your SAR, double-check that all the information you submitted is correct.

Review Your Financial Aid Letter

Soon after, you will begin to receive financial aid letters from the schools you were accepted into — typically around March or April. These letters will detail how much financial aid you are receiving and whether it is work-study, federal loans, grants, etc. This will give you a solid idea of how much you’ll need to pay out of pocket. 

Compare your financial aid letters to see which institution is offering the best financial aid package. You can do so by creating a table to organize your offers:

School NameCost of AttendanceFree Money (Grants and scholarships)Borrowed Money (Loans)Net Cost
Duke University$80,000$30,000$20,000$50,000
Cornell University$65,000$50,000$10,000$15,000

Keep in mind that most institutions will not meet 100% of the student’s demonstrated financial need, meaning you will most likely have to pay out of pocket or take out student loans. Compare your financial aid awards to see which one is more suitable to your needs as a student. 

Accept Your Loans

You’ll want to accept financial aid in this order: Free, Earned, and Borrowed (FEB). 

After accepting all of your free and earned financial aid (grants, scholarships, work-study), it’s time to accept your federal student loans.

You will want to accept your federal loans in this order:

  1. Subsidized loans
  2. Unsubsidized loans

Subsidized loans don’t accrue any interest if you are enrolled at least half-time in school, during your grace period, and during any deferment periods. Interest will only begin accruing once your repayment begins, saving you significant amounts of money. Unsubsidized loans, on the other hand, do accrue interest from the first disbursement of the loan. This means that interest will accrue during your academic enrollment, grace period, and any deferment periods. 

Because we want to be in debt for the least amount of money possible, accept your subsidized federal loans first. 

Note: To be eligible for subsidized federal loans, you must demonstrate financial need and meet the income requirements.

Closing Thoughts From the Nest

Be sure to get your FAFSA in as soon as the application opens on October 1st. This will increase your chances of maximizing the amount of federal aid that you will receive. 

If you’ve already received your federal student loans and find that it doesn’t quite fill the financial gaps in your tuition, consider borrowing private student loans.

Sparrow can help you compare private student loans that you qualify for across 15+ private lenders. Consider submitting a free application with us today.

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