Financial Literacy For College Students: Exploring Student Loans

Amidst submitting college applications, polishing off your admission essay and narrowing down where you want to continue your education, don’t forget one critical consideration: how are you going to pay for it? Unless you have scholarships, grants or a college fund set aside, you’ll likely need a student loan to make your dreams a reality. Loans aren’t one of the most glamorous aspects of the college lifestyle, but they’re often a necessary step to get you in the door.

Still, if navigating the process of student loan financing and preparing to pay off debt in the future fills you with dread, you’re not alone. As your partner on the journey, Rivers Edge Bank aims to be a trusted resource for financial literacy for college students and throughout every phase of life. Whether you’re applying for a student loan or will soon be paying off student loans, we’re here to make your next steps as straightforward as possible. That starts with exploring all of your options and considering how different types of student loans impact your financial future.

Discover What Type Of Student Loan Is Right For You

College is a time to branch out and carve a place for yourself in the world, making everyone’s journey unique along the way. Similarly, there’s no one type of student loan that is best for everyone, so choosing the right option depends on your individual circumstances. Are you attending a public or private university? In state or out of state? How much do you need to borrow? Do you have savings or a steady job to help supplement your college costs? While the requirements for student loans vary depending on the lender, generally there are two types of student loans to consider: federal and private. By taking the time to understand the differences between federal and private loans, you improve your financial literacy as a college student and set yourself up to make informed decisions about what’s right for you. 

What Are Federal Student Loans?

Federal student loans are paid by the government for eligible students to help cover the costs of tuition, books, supplies and room and board. Advantages of federal loans include flexibility in repayment plans and potentially even partial loan forgiveness based on your job after graduation. The two main types of federal student loans you’ll come across are subsidized and unsubsidized, with eligibility and borrowing limits differing slightly between the two. Depending on your eligibility, you may opt to take on a mix of subsidized and unsubsidized loans to maximize the amount you’re able to borrow. For detailed information about federal student loans and your options, visit studentaid.gov.

Subsidized Loans

If you’re eligible for a subsidized loan, a smart approach is to borrow the maximum amount you’re able to and supplement with unsubsidized loans if needed. Subsidized loans don’t accumulate interest until after you finish school, so you’ll ultimately pay less on these student loans. Other differentiating factors include:

• Students must demonstrate financial need based on the Free Application for Federal Student Aid (FAFSA) to be eligible
• Available for undergraduate students only
• Interest does not accrue on your loan balance while you’re enrolled in school at least half-time and for a six month grace period following completion of your education or dropping enrollment below half-time
• Lower borrowing limits hold you to a maximum amount you’re able to borrow each year

Unsubsidized Loans

Whether or not you qualify for a subsidized loan, unsubsidized loans may be another option to add to your financial toolkit since eligibility requirements and borrowing limits are less strict. However, keep in mind you’ll pay more for these loans over time because interest starts accumulating right away. Other key differences include:

• Students do not need to demonstrate financial need to qualify
• Available for undergraduate and graduate students
• Interest starts to accrue immediately, adding on to the balance you’ll owe once you’re no longer enrolled
• Borrowing limits are higher than subsidized student loans so students are able to borrow more through unsubsidized funds

What Are Private Student Loans?

Private student loan financing is offered through independent financial institutions. These loans help cover education costs and can contribute toward expenses to close the gap when federal loans aren’t enough to meet all of your needs. While federal loans follow the same standard guidelines and requirements, private loans have a lot more variability since the lender sets their own terms. Applying for a private student loan is often more difficult because many private loans require the borrower to have a good credit history. If you haven’t established credit or are just starting out as a young adult, a private lender may require a cosigner with good credit to assume responsibility for repaying the loan with you.

Securing student loan financing with a private lender requires careful consideration so you know what you’re signing up for upfront. Ask questions to ensure you’re setting your future self up for smooth repayment. Here are a few to help you get started:

• What is the lender evaluating your eligibility on? Do you need to meet certain credit or income standards?
• Are interest rates fixed or variable? (i.e. Will your loan lock in on an interest rate throughout the life of your loan, or will it fluctuate with the market and leave you open to periods of higher interest?)
• What are expectations for paying the student loan? Are you responsible for payments while you’re still in school, or can you elect to wait until you’ve graduated to begin?
• Are there safeguards like deferment and forbearance in place to help you pause or lessen your loan burden if you’re experiencing financial trouble?
• What are the consequences for failing to make required loan payments?

So long as you feel comfortable with your ability to meet loan requirements and confident you’ll be able to pay off the loan in the future, a private loan could be a valuable opportunity to close the gap in your college fees.

Applying For A Student Loan: Federal & Private Requirements

Whether you’re applying for a federal student loan or private loan, be sure to stay on top of not only application deadlines but also when applications open. For example, federal aid requests through the FAFSA typically open on October 1 each year, though the date is subject to change based on federal regulations. The earlier you apply, the more funding options you’ll have available to you. Many grants (think free money) are awarded on a first-come, first-served basis from the government, reducing the amount you’d need to borrow through a loan. That’s less money you have to pay back and less debt weighing you down in adulthood.

Before applying for a student loan, make sure you understand all of the offers and opportunities available to you. Some schools may offer more generous financial aid than others, so don’t apply for a loan until you know more about how it fits into the bigger picture. If you have scholarships and grants awarded to you, take advantage of them and then re-evaluate what you still need to cover expenses.

Finally, gather important documents like your Social Security number, tax information, proof of enrollment and other financial details depending on the application requirements. Be ready to dive into a sea of numbers and dollar signs, but know all of your work and attention to detail is necessary to get the funding you need for your future.

Applying For Federal Student Loans

Applying for federal aid is a streamlined process with just one application required to qualify for scholarships, grants, loans, work study programs and more. The FAFSA typically opens on October 1 for applications for the following school year. For example, in 2025, the FAFSA is expected to be available for the 2026-2027 school year on October 1. The deadline is usually June 30 directly preceding the school year you’ve requested aid for, so don’t put your application off until the last minute. The process includes the following steps:

1. Complete the FAFSA for free at fafsa.gov. You will be asked to include at least one school on the form but may add up to 20 schools you’re interested in.
2. Watch for financial aid offers in the months that follow from the institutions you listed on your FAFSA. Each university will evaluate your eligibility differently based on available funding from the school, state and federal government. Your school will provide instructions to accept the loan or a portion of the loan.
3. Most schools will require you to complete entrance counseling before you’re awarded the loan to reinforce your responsibility to pay it back. They will provide instructions to ensure you fulfill this requirement in a timely manner. 
4. You must review and sign a Master Promissory Note (MPN) outlining the terms and conditions for all of the federal loans you accept. Typically your school’s financial aid office will be in touch with instructions to return the form.

Applying For Private Student Loans

Applying for private student loan financing requires a bit more research and work upfront to determine eligibility and find lenders with terms that best fit the kind of loan you’re looking for. The application process and deadlines will vary depending on the lender, but generally you can expect the following:

1. Once you’ve identified a loan you’re eligible for and fits your financial needs, follow the directions on the lender’s website to complete their application. The application will likely include similar information to what you would share on the FAFSA, like personal identifying information and your school(s). However, private lenders may also look further into your financial history, including your credit and proof of income to ensure you’re able to follow through on repaying the loan.
2. Keep in mind a private loan will usually include a hard inquiry into your credit, which has a slight decrease on your credit score. Check if your lender offers prequalification to see if you’re likely to be approved and for how much before completing a full application.
3. If your lender requires you to have a cosigner, make sure they’re aware what they’re signing up for and fill out their own information on the application as needed.
4. Your lender will let you know if your loan is approved and finalize the details. You will be required to sign a promissory note committing to the loan. 
5. Your lender will share your loan information with your school to verify enrollment and the loan amount.

Student Loan Financing: Tips For Paying Student Loans

Millions of people use student loans to help cover the costs of college, but it’s important to remember that these loans are borrowed money that must be repaid after graduation or leaving school. Whether you take out federal or private loans for your education, you’ll be expected to repay the loan on time and with interest. Failure to make payments can negatively affect your credit score, which can have an impact when applying for a credit card or future loans, like a mortgage.

When the time to start paying your student loans gets closer, you’ll want to contact your loan servicer to find out exactly when payments will start, how much they’ll be and when they’re due. Your monthly payment will be based on the amount you owe, your interest rate and the length of the repayment plan. To set yourself up for success, try following best practices, such as:

• Pay more when you’re able: While it’s important to always make at least the minimum payment, experts recommend that you try to pay more whenever you can. This will help you repay your loans faster, reducing the amount of interest charges you’ll pay and possibly saving you thousands of dollars in the long run.
• Start paying interest early: Some student loans capitalize the interest on your loan, meaning that while you don’t have to make payments in school, the interest that accrues on the loan will be added to your principal balance when you graduate. Increasing the total amount you owe also means you’ll pay more in interest over time, so if your loan states capitalization as a condition, consider starting to make payments covering any accrued interest while you’re still in school. Getting ahead of interest while you’re not making other loan payments is a strategic way to reduce your debt burden after school.
• Choose a repayment plan best suited for your lifestyle: With a federal student loan, you have several options for repayment and the ability to switch payment plans as your financial situation shifts. Plans range from repayment of the loan evenly spread over monthly payments for the typical 10-year duration to payments that are based on your income. If you’re a teacher or work in public service, some of what you owe for federal loans may be forgiven, meaning you don’t have to pay off that portion of the loan and it won’t continue to accrue interest. Visit studentaid.gov for more information about repaying federal student loans and loan forgiveness.
• Consider consolidating your loans: With student loan financing, it’s not uncommon to be dealing with a variety of lending institutions. With that in mind, it might make sense to consolidate or refinance your loans so you’ll only be making a single payment each month. If you have federal student loans, ask your servicer about consolidation options, and if you have private loans check with your lender to see if refinancing could get you a lower interest rate or a longer repayment term.
• Set up auto pay: For private loans, be sure to know when your payments begin and connect with your lender as necessary to ensure you have what you need to start making payments on time. To help ensure you don’t miss a payment, consider setting up automatic withdrawals from your bank account and factor these payments into your monthly budget along with other spending obligations so you have enough money to cover all your needs.
• Manage money wisely: College comes with more freedom to experience new things and explore what you love, but the majority of these things come with price tags. Don’t forget that while you usually aren’t required to pay back loans until after you’ve finished school, that doesn’t mean you can’t set yourself up for success by setting aside savings now. Open a savings account to earn interest on your money, or get repayment-ready with a checking account and free debit card from Rivers Edge Bank for convenient payments.
• Educate yourself on financial literacy for college students: To learn more about federal student loans and your repayment options, visit ed.gov and studentaid.gov. To find name and contact information about your loan servicer and other details about your loan, check out the National Student Loan Data System: nsldsfap.ed.gov.

Find Timely Resources For Financial Literacy & Student Loans At Rivers Edge Bank

If you’re like the hundreds of thousands of college students who take out student loans each year, you have a decade or more to carry this debt around, but don’t let it drag you down. Trust your local Rivers Edge Bank to help you stay on top of paying student loans with a bank account and a variety of personal banking services. Contact us to start an account today, or discover more banking solutions and financial literacy resources for college students to help you navigate these exciting next phases of your life.

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Note: This blog post is intended for educational and informational purposes only. Rivers Edge Bank does not offer or endorse any specific student loan products. The information provided here should not be considered financial advice. For guidance tailored to your situation, please consult the financial aid office at the school you plan to attend or are currently attending, as well as a qualified financial professional, if needed.