Prequalification or Preapproval for Student Loans: What’s the Difference?

Prequalification gives you a quick, no-strings estimate of how much you can borrow and what rate you might get—no credit check or paperwork required.

Preapproval, on the other hand, digs deeper: you’ll submit documentation, undergo a soft credit check, and get a more precise loan offer with detailed terms.

So, which is better? Prequalification is ideal when you’re early in the process and comparing lenders, while preapproval is the smarter move when you’re ready to apply and want to lock in the best deal.

This guide walks you through both, so you can confidently navigate your student loan options.

What Is Prequalification?

Getting prequalified for a student loan gives you an estimate of your borrowing terms (including the amount and potential interest rate) based on your finances. There’s no credit check; you provide the lender with your personal information, including your income, debt, and credit range. This may be done via an online form or over the phone.

Next, you receive an estimate of your potential borrowing ability. While there’s no guarantee you’ll receive the same loan terms from when you prequalify for student loans, you do get an idea of what kind of financing you could qualify for in the future. It also helps you vet lenders before formally applying for student loans. 

How to prequalify 

Submitting your information to prequalify for student loans is a quick process with just a few steps to follow. 

1. Provide personal information: Depending on the lender, this may be done online or over the phone. You may need to submit your name and address and an estimate of your income and outstanding debt balances. As long as you have those numbers gathered, you should be able to submit a prequalification request in minutes. 
2. Receive a prequalification decision and estimate: Based on the information you provide, you’ll receive an estimate of how much you can borrow and a potential interest rate. If submitting your information online, you should receive a decision within minutes. 
3. Determine your need for a cosigner: If you don’t prequalify for a student loan or don’t qualify for the loan amount you’re looking for, consider trying again with a cosigner. This can add more income and a higher credit score to your application. 

What Is Preapproval?

Preapproval, on the other hand, provides a more detailed analysis of your finances, giving you a more accurate loan offer. To get preapproved, you may need to submit actual documentation to demonstrate your income and employment. 

On top of that, the lender will likely perform a soft credit check. This doesn’t count as a hard inquiry on your credit report but it does show the lender information on your credit accounts and any late payments or collection activity on your credit report. 

How to get preapproved

Here’s what to expect when you’re ready to get preapproved for a student loan. The online process should take just minutes to complete.

1. Submit documentation: You may need to submit proof of your finances, such as proof of income, the name of your school, and your academic enrollment status. Some lenders require you to be enrolled at least half-time.  
2. Get a soft credit check: The lender will likely perform a soft credit check on you and your cosigner if you have one. You typically need to supply both social security numbers for this step. 
3. Receive a preapproval decision and estimate: Within minutes, you should get a loan decision and, if approved, the loan terms of your preapproval. This includes the loan amount, interest rate, other fees, monthly payment amount, and payment requirements while enrolled.

Prequalification vs. Preapproval

While a student loan preapproval is more accurate than a prequalification, neither impacts your credit report. A prequalification is usually based solely upon information you provide to the lender. And a preapproval only involves a soft credit check. 

Unlike a hard credit check, you’re the only one who can see soft pulls listed on your report — future lenders checking your credit score don’t have access to that information. So there’s no impact on future financing applications. 

Which is better?

Whether preapproval or prequalification is better for you depends on where you are in your student loan shopping journey. A prequalification makes sense when you’re just starting to gather information on how to finance your education. 

Maybe you received federal student aid packages for multiple schools and want to compare the cost of attendance at your different options. In this case, a prequalification gives you an idea of how much you can qualify for and the cost—without taking too much time.

If you’re ready to start applying for student loans and want to find the best offer, you may consider getting preapproved. This allows you to compare quotes. And once you do that, you can choose the best one and submit a formal application. 

Ask the expert

Rand Millwood

CFP®

Typically, you would want to check out three to four lenders to get a good idea of your options. This will allow you to vet the lenders that will provide you with the loan amount you need at the best rates and under the best terms based on your particular situation. Make sure you read as much of the fine print as possible to understand payment terms and payback restrictions/limitations.