Attending university is a great step in life, and it also raises one of the most significant questions: How will I afford it? Tuition, books, and housing are expensive and to most students, the solution is to seek financial aid.
A student loan is one of the most popular methods of financing your education. The concept of taking money on loan may seem grave, and it is. However, it is also a process that can be managed, and millions of students have been able to graduate with their degrees.
This guide is here to take you through the process step by step.
To begin with, What Is a Student Loan for University?
A student loan is nothing more than money that you borrow to cover your school fees. These costs may cover tuition, school fees, books, and even living expenses such as room and board.
A loan is not a gift. It is money that you will have to pay back, typically starting after graduation, with a grace period. Once you complete your studies and you will also have to pay interest. Interest is the additional charge you pay to the lender to use their money.
Student Loans vs. Grants and Scholarships: What is the difference?
When you seek financial aid, you will find three broad categories of financial aid: loans, grants, and scholarships:
Grants and Scholarships: This is the best kind of aid. Think of it as "gift money." It is granted to you on the basis of academic performance, special abilities or financial necessity. You are not required to repay this money.
Student Loans: This is "borrowed money." It is a financial aid that assists you in covering expenses once you have exhausted your grant and scholarship funds.
Since grants and scholarships are free, you should always attempt to secure as many as you can initially.
See more: How to Justify an Academic Gap
The Two Main Roads: Government vs. Private Student Loans
There are two broad categories of loans: government loans and private loans.
The one you select can significantly affect your future payments, and therefore, it is important to know the difference between them.
Government loans are funded by a country's government. In the US, they are commonly referred to as Federal Student Loans. Other sources of private loans include a bank, a credit union, or a specialized financial company.
A Quick Comparison: Government vs. Private Loans
The following is a basic table to enable you to have a glimpse of the key differences.
Feature | Government Loans (e.g., U.S. Federal) | Private Loans |
Source | U.S. Department of Education | Banks, Credit Unions, Private Lenders |
Eligibility | Based on FAFSA® for U.S. citizens/eligible non-citizens | Based on creditworthiness and income |
Cosigner | Not usually required | Often required, especially for students |
Interest Rates | Fixed (by law) | Can be fixed or variable |
Perks | Flexible repayment plans, forgiveness options | Fewer protections; may offer higher loan limits |
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Path 1: How to Apply for Government Student Loans
Government student loans are often the best place to start. The application process is very different depending on your country. We will look at the process in the United States and the United Kingdom as common examples.
For U.S. Students: The FAFSA Process
In the U.S., the key to all federal financial aid is one form: the FAFSA, which stands for the Free Application for Federal Student Aid.
Step 1: Complete the FAFSA. This is the single most important step. You (and your parents, if you are a dependent student) will fill out this online form with your personal and financial information. This form is used by the government and by universities to determine how much financial aid you are eligible to receive.
Step 2: Review Your Financial Aid Offer from Your University. After you are accepted by a university and your FAFSA is processed, the school will send you a "financial aid offer". This letter will list all the aid you qualify for, including grants, scholarships, and federal student loans. You will see the specific types of loans (like "Direct Subsidized" or "Direct Unsubsidized") and the amounts offered.
Step 3: Accept Your Loan and Sign the Master Promissory Note (MPN). You do not have to accept the full loan amount offered. You can choose to accept all of it, part of it, or none of it. Once you decide, you will officially accept the loan through your school's portal. You will also have to complete a legal document called a Master Promissory Note (MPN), which is your formal promise to repay the loan.
Tip: A Strong Application Can Reduce Your Need for Loans
As you are handling the financial aspect of your application, it is good to also concentrate on the academic aspect, as well. A strong CV and a strong Statement of Purpose (SOP) can not only get you accepted. They can be the key to scholarships and grants.
This might seem like a lot of extra work, but with new tools, especially AI, the process is easier than ever. Kite's kiteAI is a good example. It is an AI tool designed to help with this. It helps you personalize your application materials, compelling emails, CVs, and SOPs tailored for each specific professor and position, helping you stand out.
Can I Use Federal Aid for Online Universities?
Yes, in many cases. Most accredited online universities in the U.S. require you would apply for aid for Online Universities the same way you would for a traditional campus: by filling out the FAFSA.
For UK Students: How Student Finance Works
The process in the United Kingdom is different. Students in the UK do not use the FAFSA. Instead, they apply for funding through a government body, such as "Student Finance England". This single application covers both tuition fee loans (paid to the university) and maintenance loans (for living costs).
Path 2: How to Apply for Private Student Loans
Now we move to the second main category: private loans. These loans are not funded by the government. Instead, they are offered by private companies, such as banks, credit unions, or specialized financial institutions.
Who Should Consider a Private Student Loan?
You might look at private loans in two common situations:
You are a domestic student (e.g., in the U.S.) and have a funding gap. This means your federal loans, grants, and savings do not cover the full cost of your university. A private loan can be used to cover the remaining amount.
You are an international student. This is the most common reason. International students are typically not eligible for government-based aid, like the U.S. FAFSA program. For these students, private lenders are the primary path for borrowing.
Can International Students Get Student Loans?
Yes, they can. While you may not be eligible for government loans, several private companies have created special loan products just for international students. These lenders often use a different approval process. Instead of looking at your past credit history in your home country, they may look at your academic record, the university you are attending, and your potential for future success.
Comparing Top Private Lenders for International Students
For international students, the choice of a private lender is very important. Each one has a different model, different rates, and is built for a different type of student. Here is a comparison of some of the most common options, based on publicly available information.
Feature | Prodigy Finance | MPower Financing | Passage |
Primary Audience | International postgraduate students (Master's, etc.) | International students, DACA recipients in the U.S. & Canada | International students for specific high-demand programs in Canada |
Cosigner Required? | Optional | No | No (but a "collateral payment" is required) |
Loan Amounts | $10,001 - $220,000 (USD) | $2,001 - $100,000 (USD) | Up to C$65,000 (CAD) |
Interest Rate Type | Variable | Fixed | Fixed |
Typical APR Range | ~9.09% - 11.24% (variable, as low as 9.09% with cosigner) | ~10.89% - 18% (fixed, as low as 9.99% or 10.89% APR with autopay) | Not Publicly Available |
Repayment Terms | 7 - 20 years | 10 years | Not Publicly Available |
Grace Period | 6 months (full-time) | 6 months (interest-only payments) | Not Publicly Available |
Key Supported Countries | Study in the US, UK, Canada, Europe, etc. | Study in the U.S. & Canada only | Study in Canada only |
Note: When you research options, you may see articles that mention a lender called "Future Finance." It is important to know that this UK-based company is no longer a viable option. According to public records, the company's status was marked as "Converted / Closed" as of August 2024. You should focus your search on lenders who are actively providing new loans.
How to Choose the Right Private Lender for You
The table shows three very different models. The "best" one depends entirely on your personal situation.
Prodigy Finance: For High Loan Amounts & Flexibility
Prodigy Finance offers the highest potential loan amounts and the most flexibility in repayment terms (from 7 to 20 years). It is built for postgraduate students, like those pursuing an MBA or a law degree, where the cost of school is very high. The main thing to consider is that it has a variable interest rate. This means your payments could change over the life of your loan. This model may be a good fit if you expect a very high salary after graduation and can handle the risk of changing payment.
MPower Financing: For Safety & Predictable Payments
MPower Financing's key feature is its fixed interest rate. This is a major advantage for budget-conscious students. A fixed rate means your payment will never change, which gives you safety and predictability for all 10 years of your repayment. MPower also offers career and visa support services to its borrowers, which is a valuable non-financial benefit. This is a strong choice for students who value stability and want to know exactly what their payments will be.
Passage: A Niche Option for Canadian Skilled Trades
Passage is not a traditional lender. It is a specialized platform that funds international students for specific programs in Canada that lead to high-demand jobs (like healthcare, STEM, and skilled trades). It is best understood as a "talent pipeline" for the Canadian economy.
How to Apply for a Private Student Loan
The process for a private loan is more direct than the FAFSA.
Compare Lenders: Look at the options available for your school and country of study. Compare their interest rates (fixed vs. variable), fees, and repayment terms.
Gather Documents: You will need to provide personal information, your university acceptance letter, your passport, and other documents.
Apply Online: You will fill out an application on the lender's website.
Sign the Promissory Note: If approved, you will sign a legal document, similar to the MPN, which confirms the loan terms and your promise to repay.
Final Words
The process of identifying how to finance your university education is a huge undertaking, but it is not an impossible one.
We have discussed the two broad avenues of student loans: government and private loans.
The greatest lesson is that the best loan is the one that suits your needs. Whatever you do, consider a student loan as a serious tool. It is an investment in your future. You are preparing yourself to succeed in your studies and in the years that will follow by doing your research and borrowing only what you need.
Frequently Asked Questions (FAQ)
What is the process of applying for a student loan to college?
In the case of U.S. students, the first thing you need to do is complete the FAFSA. In the case of international students, you have to apply for the private lenders.
What makes me eligible for a student loan?
In the case of federal loans, you should be a U.S. citizen or a qualified non-citizen. In the case of private loans, you require a good credit history or a cosigner, but some lenders do not require this of international students.
Is it possible to take a student loan to get a bachelor's degree?
Yes, there are federal and private loans that can be taken to get a bachelor's degree.
Are international students eligible to receive student loans?
Yes. You do not qualify to take U.S. federal loans, but you can apply to take private loans with special companies such as MPower Financing or Prodigy Finance.
Do I need a cosigner for a private student loan?
Usually, yes. However, some lenders for international students, like MPower or Prodigy, do not require one.
