Information from the Washington State Department of Financial Institutions

Student Loans: Borrowing Basics


Many students turn to student loans to help pay for college expenses.

There are two main types of student loans.

  1. Federal student loans funded by the federal government.
  2. Private student loans made by a lender such as a bank or credit union.

Federal Student Loans

Federal student loans are loans made by the U.S. Federal Government. In most cases, you should use federal loans before taking out a private loan.

More about federal student loans:

  • Interest rates on federal student loans are fixed. Meaning they don't change.
  • You don’t need a credit check to get most federal student loans. 
  • You don't need to repay your federal loans until after you leave college.
  • If eligible, the government may pay the interest while you are in school.
  • Federal student loans offer flexible repayment plans.

Types of Federal Student Loans

  • Direct Subsidized Loans
    Available to undergrad students based on financial need. Subsidized Loans do not accrue interest while you are in school at least half-time.
  • Direct Unsubsidized Loans
    Available to undergrad and grad students. Unsubsidized loans do accrue interest while you are in school.
  • Direct PLUS Loans
    Available to grad students and parents of undergrad students. You or your parent must pass a credit check to receive these loans.
  • Direct Consolidation Loans
    Allow you to combine several federal loans into one loan. These loans are an option if you have completed school.

Learn more about Federal Student Loans

Applying for Federal Student Loans

To get a federal loan, you must complete the Free Application for Federal Student Aid (FAFSA) form.

Free Application for Federal Student Aid (FAFSA) form.

Private Student Loans

Private student loans are available if you need them. Private loans are available from lenders such as banks or credit unions.

More about private student loans:

  • Private student loans are best used to fill a payment gap after maxing out federal loans.
  • The lender determines the terms and conditions of a private loan.
  • Private student loans may require a credit check. The better your credit score, the better interest rate you will receive.
  • Private student loans interest rates are either fixed or variable. A fixed interest rate stays the same for the life of the loan. A variable interest rate may go up or down.
  • A private student loan repayment term varies by lender. Some offer a 10-year repayment term, which is the standard term for federal loans. Others have terms ranging from five to 15 years.
  • Most private lenders allow you to defer payments until after you leave school. However, some private lenders expect you to make small, interest-only payments while you are in school.

To get a private loan, you must apply with a student loan lender. It is a good idea to shop around and compare the terms of the loan.