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Student Loan Borrowing Basics

While it is true that you should be careful about accruing debt, student loans are a commonly used type of financial aid for funding your college education. There are a ton of questions that surround the process: Where can I find loans? How much should I borrow? How much is too much? Should I use federal or alternative loans? Here, we will give an overview of the student loan borrowing basics student and parents should be aware of.

Step 1: Consider the federal process.

The first step to getting a student or parent loan is often completing the Free Application for Federal Student Aid (FAFSA). Whether or not you believe you will receive any financial aid based on your family’s income, completing a FAFSA makes you eligible for federal student and parent loans. For students, this is the only application needed for federal student loans! Once complete, your information will be sent to the schools you list on the FAFSA. Students will be offered Federal Direct Subsidized and Unsubsidized Loans. Parents must complete a credit-based Parent PLUS Loan application for each school year. If approved, they will be offered a Federal Parent PLUS Loan.

Step 2: Identify how much you need.

After you review what other financial aid you may have (scholarships, grants, etc.) alongside your estimated college related costs, decide how much you need in loans. If you have any savings for college or plan on paying a certain portion out of pocket, we suggest that you account for those funds as well. Take your available funds, minus your estimated costs and that will give you an estimate for how much you should borrow in loans. Use our Estimated Remaining Costs Worksheet if you need a place to start!

Step 3: Compare federal and alternative loan sources.

Alternative loans (also called private loans) are all other loans that do not come from the federal government. Alternative loans come from private lenders. The process to get these loans often involves a credit check. While federal loan interest rates are available at a set rate per year, interest rates for alternative loans may vary based on your eligibility. Another point of comparison is the amount. While federal student loans are offered at a set amount per school year, alternative loans may be offered at a higher amount.

One other thing to consider is repayment. Federal student loans have repayment deferred (pushed back) until 6 months after you are no longer enrolled at least half time. That typically means 6 months after graduation! The comparison process is personal. Take your time but try to decide early so that your loans post to pay your school bills on time!

Step 4: Accept your loans.

Once you have decided what loan you want, its time to accept! For federal loans, this process is very simple. Log into Catalyst and specify the amount you wish to accept. Remember, you do not have to take the maximum of what is offered and you should only accept what you need for your educational expenses. For Parent PLUS Loans, parents can indicate what amount they would like to accept on their application. For alternative loans, once you have completed their application process, they will most often send your information to your school directly.

Step 5: Complete appropriate paperwork.

Federal student and parent loan “paperwork” can be completed at Make sure not to mix up your log in information! Students must complete Loan Entrance Counseling (an online informational session about loans), and a Master Promissory Note (a promise to pay statement). Typically, you only have to complete them once and you are good for the rest of your degree program! Parents will need to complete their application and Master Promissory Note once per school year for Parent PLUS Loans. Alternative loan lenders will have you complete their specific paperwork before they send your loan information to your school.

Step 6: Wait for your loans to pay to UC.

As long as your paperwork is complete your loan(s) should disburse to pay your bill around ten days before your courses start. It is not too late to receive financial aid for the 2020-21 academic year. If you are getting a late start, the One Stop Center is here to answer your questions and assist you along the way. If you have more in financial aid than your billed costs, the extra will be sent back to you as a refund check. This is how you can use your financial aid to fund off-campus housing, books and whatever else you may need.

For more information about student and parent loans please visit the UC One Stop Student Service Center Loan Information page.