Student Loans - Iowa College Access Network - ICAN

Student Loans

Think Before You Borrow
Student loans can help make college a reality. However, unlike grants, scholarships, and work-study, student loans are a form of financial aid that must be repaid with interest. As with any debt, you must repay your student loans; even if you don’t complete your education, you’re not satisfied with your education or you don’t find employment after you graduate. Failure to make regular monthly payments could result in a defaulted student loan, which could have a serious impact on your credit score.

As with all loans, you must repay what you borrow (the principal) plus interest (a percentage of the principal). When you make payments, each check is divided up to pay:

  • Any late charges or collection costs.
  • Interest accrued (or built up) since the last payment.
  • Possibly part of the principal.

Not all student loans are alike. The two categories of student loans are federal and private loans.

Federal Student Loans are an option provided by the US Department of Education, and, for some students, are the most affordable option. Federal student loans offer deferred payments and fixed interest rates, and for some students even a subsidized interest rate while in-school. There are also federal loan options for parents. The application process for federal student loans is done through the
Free Application for Federal Student Aid (FAFSA) and accepted through your institution’s financial aid office. For more information visit
Private Student Loans are offered by various private lenders, banks, and credit unions. Depending on a lender’s qualification requirements, private loans may be a better fit for some students and parents. Each lender has a different set of criteria, which, when qualified, can offer students and parents better interest rates and payment options.

The State of Iowa has a nonprofit lender, Iowa Student Loan, who offers rates for students and parents below those of national lenders and the Federal Plus Loan. Make sure they are one of the options you research. Learn more at


  Federal Loans Private Loans
Available From
  • U.S. government
  • Private lenders like banks, credit unions, and savings and loans
Interest Rates
  • Fixed
  • Generally lower than private loans
  • Some loans do not accrue interest until repayment begins
  • Fixed or variable
  • Generally higher than federal student loans but can be lower than the Parent PLUS loan
  • Deferred while enrolled at least half-time in college
  • Interest may accrue on certain loans
  • May or may not be deferred while in school
Application Process
  • Must file a Free Application for Federal Student Aid (FAFSA)
  • No cosigner required
  • No credit check necessary with the exception of PLUS loans
  • Obtain an application from the lender
  • May need to file a FAFSA
  • May need a cosigner
  • Likely subject to a credit check

Explore All Other Options
Before you take out a loan, make sure you’ve considered all possible options for funding your education. Search for additional scholarships, consider a part-time job, or talk to your financial aid office.

Can You Afford the Debt?
When considering a loan also consider whether you’ll be able to repay it. Keep in mind that you may have to continue borrowing student loans each year that you’re in school. Your student loan payment obligation will reduce what you can spend in the future on a car, home, furniture, other living expenses, and family. It’s important to keep your borrowing to a minimum.
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