how to take out more federal student loans

Last Updated on August 24, 2022 by Smile Ese

Have you already taken out all your federal student loans? If you can’t pay them all back, you should take out more. I’ll explain why.

Government student loan programs like Direct Loan and Federal Perkins Loan offer several important benefits. You can borrow more per year, they offer a fixed interest rate, and repayment options are generous. Private student loans do not have this safety net. Go through the article below to find out how you can take out more federal student loans if you think your financial situation allows it.

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types of student loan borrowing options

Pros and Cons of Student Loan Consolidation for Federal Loans

If you need money for college expenses, you need to know what your borrowing options are. The two most common ways to borrow are federal student loans and private student loans.

Types of federal student loans

There are three types of federal student loans. They’re all provided by the government through the Federal Direct Loan Program.

  • Direct Subsidized Loans are based on financial need.
  • Direct Unsubsidized Loans are not based on financial need. They’re not credit-based, so you don’t need a cosigner. Your school will determine how much you can borrow, based on the cost of attendance and how much other financial aid you’re receiving.
  • Direct PLUS Loans are credit-based, unsubsidized federal loans for parents and graduate/professional students. Direct PLUS Loans for parents are also known as Parent PLUS Loans.

It’s important to consider federal student loans before you take out a private student loan, because there are differences in interest rates, repayment options, and other features.

Types of private student loans

When you’ve explored scholarships, grants, and federal loans, and still need money for college, you can consider a private student loan.

  • They’re issued by a bank or other financial institution.
  • Private student loans are taken out by the student; they’re often cosigned by a parent or another creditworthy individual.
  • Parent loans are another way to get money for college. A parent or other creditworthy individual takes out the loan to help their student pay for college.

How to apply for a federal or private student loan

There are different application processes to follow, depending on which type of student loan you’re looking for.

The application process for a federal student loan

You apply for a federal student loan by filling out and submitting the Free Application for Federal Student Aid (FAFSA®). You MUST submit the FAFSA to be eligible for a federal student loan.

Financial aid tip

Almost everyone who applies for financial aid is eligible for some form of aid. File the Free Application for Federal Student Aid (FAFSA®) to see how much you qualify for. Embark makes it easy with a simplified process and step-by-step guidance—plus it’s free.

To submit the FAFSA for federal student loans (and for all types of federal financial aid), there are a few things to keep in mind:

  • Remember that there’s no cost for submitting it. (If you’re asked to pay, you’re not at the right website.)
  • Complete the FAFSA every year you need money for college.
  • Get it in as soon after October 1 as possible. The earlier, the better, since some grant money is awarded on a first-come, first-served basis.

You’ll find out about how much you’re eligible for in federal student loans when you receive your financial aid offer.

How to apply for a private student loan

Since private student loans are offered by banks and financial institutions (as opposed to the federal government), you apply directly to the lender.

Follow these instructions to apply for a private student loan:

  1. Go to the lender’s website.
  2. Check the interest rate of the loan, along with the flexibility of repayment options and other benefits.
  3. Apply directly on the website. You’ll be asked to choose the type of repayment option and interest rate type you want.
  4. You may want to consider adding a cosigner which may improve your chances of getting the loan.
  5. The lender will check your credit (and your cosigner’s, if you have one), and will communicate the decision to you.

How To Take Out More Federal Student Loans

You accept your federal student loans by signing and returning your financial aid offer. You may be asked to take part in entrance counseling at your school to make sure that you understand your loan obligations. Plus, you’ll sign a Master Promissory Note (MPN) to agree to the loan’s terms.

You accept your private student loans after you’ve been approved. Here’s our process:

  1. You’ll choose the type of interest rate and repayment option for your loan.
  2. You or your cosigner will accept the terms of your loan and sign it electronically.
  3. Your school will be asked to certify your eligibility, including verifying your enrollment and the loan amount you’ve requested.

Both federal and private student loans are legal agreements. When you agree to a loan and sign or e-sign for it, you’re committed to paying it back, along with interest.

Repaying federal and private student loans

  • Federal student loans: Following a six-month grace period, you generally begin to make principal and interest payments.
  • Private student loans: You’ll generally have a six-month grace period. If you elected to make in-school fixed or interest payments with our Smart Option Student Loan, you’ll continue to make those payments during your grace period. After that, you’ll begin to make principal and interest payments.

How to borrow responsibly for college

When you’re borrowing money for college, it’s important to borrow responsibly. We recommend these three steps:

  1. Start with your college savings and “free” money that you won’t have to pay back—scholarships, grants, and work-study.
  2. Use federal student loans.
  3. Consider a responsible private student loan.

Other tips for borrowing responsibly: Consider what your salary will be after you leave school, remember that you’ll have to pay back your loans with interest, and don’t borrow more than you’ll need for school costs.

private student loans

Private student loan volume grows when federal student loan limits remain stagnant.

Private student loan volume grew much more rapidly than federal student loan volume through mid-2008, in part because aggregate loan limits on the Stafford loan remained unchanged from 1992 to 2008. (The introduction of the Grad PLUS loan on July 1, 2006 and the increases in the annual but not aggregate limits had only a modest impact on the growth of private student loan volume. The subprime mortgage credit crisis of 2007-2010, however, limited lender access to the capital needed to make new loans, reining in growth of the private student loan marketplace.) The annual increase in private student loan volume was about 25% to 35% per year, compared with 8% per year for federal loan volume.

Then the Ensuring Continued Access to Student Loans Act of 2008 increased the annual and aggregate loan limits on the federal Stafford loan starting July 1, 2008. This shifted significant loan volume from private student loan programs to federal. Private student loan volume dropped in half in 2008-09, according to the College Board’s Trends in Student Aid 2009.

Private student loan volume is expected to return to the 25% annual growth rate unless there is another increase in federal loan limits or an expansion of the availability of federal student loans. For example, the proposal for expanding Perkins loan funding from $1 billion a year to $8.5 billion a year will cause a significant decline in private student loan volume. But so long as federal loan limits do not increase every year, private student loan volume will continue to grow at double-digit rates.

If current trends continue, annual private education loan volume will surpass federal student loan volume by around 2030. Accordingly, it is important that students have tools they can use to compare different private student loans.


As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan. They should also file the Free Application for Federal Student Aid (FAFSA), which may qualify them for grants, work-study and other forms of student aid. Undergraduate students should also compare costs with the Federal PLUS Loan, as the PLUS loan is usually much less expensive and has better repayment terms. Grad students can find the best graduate loan options on Finaid as well.

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees. (The lenders that do not charge fees often roll the difference into the interest rate.) A good rule of thumb is that 3% to 4% in fees is about the same as a 1% higher interest rate.

Be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid. Finaid’s Loan Comparison Calculator may be used to generate an apples-to-apples comparison of different loan programs.

The best private student loans will have interest rates of LIBOR + 2.0% or PRIME – 0.50% with no fees. Such loans will be competitive with the Federal PLUS Loan. Unfortunately, these rates often will be available only to borrowers with great credit who also have a creditworthy cosigner. It is unclear how many borrowers qualify for the best rates, although the top credit tier typically encompasses about 20% of borrowers.

Generally, borrowers should prefer loans that are pegged to the LIBOR index over loans that are pegged to the Prime Lending Rate, all else being equal, as the spread between the Prime Lending Rate and LIBOR has been increasing over time. Over the long term a loan with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate. About half of lenders peg their private student loans to the LIBOR index and about 2/5 to the Prime lending rate.

Some lenders use the LIBOR rate because it reflects their cost of capital. Other lenders use the Prime Lending Rate because PRIME + 0.0% sounds better to consumers than LIBOR + 2.80% even when the rates are the same.

It is not uncommon for lenders to advertise a lower rate for the in-school and grace period, with a higher rate in effect when the loan enters repayment.

Federal student loans are not available for expenses incurred by law, medical and dental students after they graduate, such as expenses associated with study for the bar or finding a residency. There are two types of private student loans for these expenses:

  • A Bar Study Loan helps finance bar exam costs such as bar review course fees, bar exam fees, as well as living expenses while you are studying for the bar.
  • A Residency and Relocation Loan helps medical and dental students with the expenses associated with finding a residency, including interview travel expenses and relocation costs, as well as board exam expenses.

subsidized loan

Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.

Unsubsidized Loans are loans for both undergraduate and graduate students that are not based on financial need. Eligibility is determined by your cost of attendance minus other financial aid (such as grants or scholarships). Interest is charged during in-school, deferment, and grace periods. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it’s paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay. See“Debt Management & Student Loans” for more important information on the capitalization of interest.

Loan TypeBorrowerInterest Rate
(for loans disbursed from 7/1/20 to 7/1/21)
Interest Rate
(for loans disbursed from 7/1/21 to 7/1/22)
Origination Fee
(for loans disbursed from 10/1/20 to 10/1/22)
SubsidizedStudent2.75% Fixed for undergraduates3.73% Fixed for undergraduates1.057%
UnsubsidizedStudent2.75% Fixed for undergraduates3.73% Fixed for undergraduates1.057%
UnsubsidizedGrad Student4.30% Fixed for graduates5.28% Fixed for graduates1.057%
PLUSParent PLUS5.30% Fixed6.28% Fixed4.228%
PLUSGrad PLUS5.30% Fixed6.28% Fixed4.228%
DefermentYou may receive a deferment if you are enrolled in school at least half-time or for unemployment or economic hardship
RepaymentThere is a 6 month grace period that starts the day after you graduate, leave school, or drop below half-time enrollment. You do not have to begin making payments until your grace period ends.

best student loans

Bankrate wants to empower readers to make smart financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure the content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy. When shopping for a student loan, look for a competitive interest rate, flexible repayment terms that meet your needs, generous hardship options and minimal fees. Loan details presented here are current as of Sept. 30, 2021. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability. To learn more, read our methodology section above. 

Best student loan interest rates in November 2021

  • Private Student Loan Rates
  • Refinance Student Loan Rates
  • Bad-Credit Loan Rates
  • Graduate Student Loan Rates
  • MBA Student Loan Rates
AscentLoans without a co-signer5.83%–12.99% (with autopay)4.08%–11.33% (with autopay)5–20 years$2,001–$200,000Not specified
Citizens BankMultiyear approval3.23%–10.95% (with autopay)1.03%–10.41% (with autopay)5–15 years$1,000–$350,000 depending on program620
College AveQuick application process2.94%–12.99% (with autopay)0.99%–11.98% (with autopay)5–20 years$1,000–100% total cost of attendance (maximum $150,000 for some degrees)Not specified
Common BondPersonalized mentoring3.74%–10.74% (with autopay)3.78%–9.34% (with autopay)5–20 years$2,000–100% total cost of attendance ($500,000 lifetime maximum)Not specified
EarnestFlexible repayment termsStarting at 2.99% (with autopay)Starting at 0.99% (with autopay)Not specified$1,000–100% total cost of attendance650
DiscoverPerks and rewardsSee rates at Discover.comSee rates at Discover.com15 or 20 years$1,000–100% total cost of attendanceNot specified
Sallie MaePart-time students3.5%–12.6% (with autopay)1.13%–11.64% (with autopay)10–20 years$1,000–100% total cost of attendanceNot specified
SoFiLoans without fees2.99%–10.9% (with autopay)0.99%–11.33% (with autopay)5–15 years$5,000–100% total cost of attendanceNot specified

how much federal student loans can you take out

Student loans aren’t limitless. The maximum amount you can borrow depends on factors including whether they’re federal or private loans and your year in school.

Undergraduates can borrow up to $12,500 annually and $57,500 total in federal student loans. Graduate students can borrow up to $20,500 annually and $138,500 total.

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