It is of no doubt that paying for college can be a challenge for many students. After all, grant and scholarship dollars only stretch so far, and borrowing money may be the only way to afford higher education.
If you are eligible, you can obtain a student loan through the federal government by filling out your free application for Federal Student Aid (FAFSA), or you can apply with a private lender to get the financing assistance you need. Numerous students tend to finance part of their education through federal loans and apply for private loans to cover any gaps. The application processes for federal and private student loans are separate, and lending terms tend to differ.
With that said, I compiled everything you need in order to easily get a student loan to finance your education. However, before going ahead to borrow this money, you may want to use a student loan calculator so you know what to expect when the time comes for repayment.
Table of Contents
What is a Student Loan?
A student loan is a type of loan specifically designed to help you cover the costs of higher education . This can include tuition, fees, books, supplies, and even living expenses . There are two main types: federal and private.
Federal student loans: These come from the U.S. Department of Education and generally offer lower interest rates and more borrower protections, like income-based repayment options and loan forgiveness programs.
Private student loans: These come from banks, credit unions, or other private lenders. They may offer more flexible terms but often have higher interest rates and fewer borrower protections than federal loans.
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How to Get a Federal Student Loan
In order to unlock federal student loans and federal student aid, you will need to fill out the FAFSA form. It is free and opens in October each year. Fill out the year before you plan to attend school and reapply with a new FAFSA form each school year.
Due to the fact that federal student loans come with generous borrower protections and no credit check, it is best to apply for these before seeking private loans, especially if you are an undergraduate student.
1. Set up an Account:
Before you apply for a federal student loan, you have to create a Federal Student Aid (FSA) account to complete the FAFSA online.
2. Gather Your Documents:
You are able to obtain a sneak peek of the FAFSA on the worksheet provided by the FAFSA. Make sure you compile the list of schools that should receive your FAFSA form and gather your Social Security number, driver's License number, Federal tax return, proof of income (usually with W-2 forms) and current bank statements. If you are listed as a dependent, you will need to collect these materials from your parents.
3. Fill Out The Forms:
You need about 30 minutes to complete the FAFSA forms.
4. Review Your SAR:
As soon as you submit the FAFSA, the department of education will send you a student Aid Report (SAR), which shows y0u a summary of all the information you have entered. Review the SAR and make sure everything is accurate.
5. Receive Your Financial Aid Offers:
The colleges you listed on the FAFSA will calculate your financial aid and then send you a financial aid letter, which may include a mix of loans, grants and work-study options.
6. Complete Loan Counseling:
Before you receive a loan, you are required to complete loan entrance counseling to learn how your loan works, including repayment terms and how to avoid defaulting. You will also be required to sign a promissory note before accepting the loan.
7. Accept Your Financial Aid Offer:
Each school will have a different level of aid available to you. After evaluating offers and selecting a college, get in touch with the institution to accept the financial aid. The school will advise you on how to take federal student loans if they are part of the package.
You'll learn whether you qualify for unsubsidized or subsidized federal student loans when you receive your findings. Loans with subsidies are available to undergraduates who have qualifying expenses. If eligible, the U.S. Department of Education will cover your interest expenses both during the deferment period and while you are enrolled in classes. With an unsubsidized loan, you are responsible for paying all interest expenses, which begin to accrue at the time of loan distribution.
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How to Get a Private Student Loan
In case you have already exhausted your federal student loan borrowing limit or do not qualify for federal limit or do not qualify for federal financial aid, you may need to cover the remaining academic costs with a private student loan. Private student loan options are from Banks, Credit Unions, and Online Lenders.
1. Shop Around With Multiple Lenders
Make sure you compare loan amounts, interest rates, discounts, benefits, fees and repayment plans. Since you will likely have a relationship with this lender for several years, it is also a good idea to evaluate its hardship options in case of financial trouble later. The lender should also have good reviews and responsive customer service.
2. Check Your Eligibility
Before you head on to apply, check first if your credit history and income meet the lender's qualifications. You are able to check your credit reports for free weekly through Dec. 30, 2023 at AnnualCreditReport.com.
In order to be eligible for a private student loan on your own, you typically need to have good credit, defined as having a FICO score of 670 or higher. Prequalification is a service provided by most lenders that lets you check your eligibility and possible rates without affecting your credit. You will require a co-signer who can meet the standards if you are unable to.
3. Complete The Application
You’ll typically need to agree to a credit check and provide details such as your school, cost of attendance, type of degree, citizenship information, Social Security number, proof of income and debt obligations. Depending on the lender, the application process can take a few minutes to a few days to complete.
4. Wait For Verification
The lender will confirm your cost of attendance with your school, which may take a few weeks. As soon as your school verifies the information, the lender typically releases the funds directly to the school.
Federal student loans are typically preferable to private ones for several important reasons, even though private loans can be useful when federal aid is insufficient. Federal loans offer borrower protections that private loans don't, including loan forgiveness options and income-based repayment plans.
While private lenders may offer deferment and forbearance, the terms vary. Additionally, private loans with variable interest rates can become more expensive over time as rates may increase during the repayment period.
Where to Get a Private Loan
There are several options when it comes to securing a private student loan. These include traditional banks, credit unions, online lenders and state-based or state-affiliated organizations. When looking for a lender, consider factors such as interest rates, repayment terms and customer service.
Do not forget to shop around and compare offers from different lenders to find a loan that best suits your needs.
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How to Get Approved For a Private Student Loan
It is of no doubt that approval for a private student loan is based on several factors. These include your credit score, income level, and the cost attendance at your school. Below are some tips to help you increase your chances of approval:
Improve Your Credit Score:
You can do this by making timely payments, keep your credit utilization low, and regularly check your credit report for any errors.
Consider a Co-signer:
If you do not have a strong credit history, consider asking a parent or other trusted individual with good credit to co-sign your loan. This can significantly increase your chances of approval and potentially get you a lower interest rate.
Apply With Multiple Lenders:
Different lenders have different eligibility criteria. By applying with multiple lenders, you increase your chances of getting approved. Just remember to apply within a short window of time to minimize the impact on your credit score.
Final Thoughts: How to Get a Student Loan
Understanding the student loan process is essential for college planning, particularly after exhausting other financial aid options. Begin by submitting the FAFSA to determine your federal aid eligibility. Review your aid package, including federal loans, to identify any remaining financial gaps.
If necessary, consider private loans to cover outstanding costs. Carefully examine the terms of all loans, whether federal or private, and fully comprehend your obligations before committing. Pay close attention to repayment plans and interest rates throughout the application process.