How to get a student loan

Paying for college is a challenge for many potential students. Grants and scholarships are only expanding so far, so borrowing money may be the only way to pay for higher education. More than half of students who went to college in the 2019-20 school year took out student loans, according to the Federal Reserve.

If you go this route, there are two main types of loans to choose from: private and federal. Because federal student loans come with generous protections for borrowers and no credit check, it is best to request it first. Private student loans can be more expensive, but generally have higher loan limits. If you want to borrow money for your education, you first need to know how to apply for a student loan.

How to get a federal student loan

To release federal student loans and federal student assistance, you must first complete the form Free Application for Federal Student Aid (FAFSA) form. It’s free and comes out in October of each year. Complete it the year before you intend to go to school and reapply with a new FAFSA form every school year.

When you get your results, you will know whether you qualify for subsidized or unsubsidized federal student loans. Subsidized loans are for undergraduates with financial need. If you qualify, the Department of Education will pay your interest charges while you are in school and during the deferral. You pay all the interest charges with an unsubsidized loan.

Here’s what to expect in the application process:

  1. Create an account. Students will create a Federal Student Aid (FSA) account to complement the FAFSA.
  2. Gather your documents. Get an overview of the FAFSA on the worksheet provided by FSA. Compile a list of schools that should receive your FAFSA form and gather your social security number, driver’s license number, federal income tax return, proof of income (usually with W-2 forms) and current bank statements . If you are listed as a dependent, you will also need to collect these documents from your parents.
  3. Fill out forms. The FAFSA takes about 30 minutes to complete.
  4. Review your SAR. After you submit the FAFSA, the Department of Education will send you a Student Assistance Report (SAR), which shows you a summary of all the information you entered. Check the accuracy of the SAR.
  5. Receive your offers of financial assistance. The colleges you’ve listed on the FAFSA will calculate your financial aid and send you a financial aid letter, which can include a mix of loans, grants, and work-study options.
  6. Accept financial aid. Your financial aid offer may vary depending on each school. Once you have compared the offers and chosen a school, contact the school to accept the financial aid. If it includes federal student loans, the school will tell you how to accept them.

The CSS profile

While the FAFSA is your only route to federal student aid, a lesser-known form allows you to apply for non-federal scholarships and other types of aid directly from the school. the Profile of the College Scholarship Service (CSS) is available in October of each year. But unlike the FAFSA, there is a small cost involved: an upfront fee of $ 25 and an additional fee of $ 16 for each school you include on the form.

You may be eligible for assistance beyond your federal options, so consider this option if your school participates. To complete the application, first register with the board of directors. It’s a bit more in-depth than the FAFSA – it takes about two hours – so check what kind of documents you need. After submitting the form, you can periodically visit your CSS profile dashboard to verify your application, add other colleges, and upload additional documents.

How to apply for a private student loan

If you’ve reached the borrowing limit on your federal student loan or are not eligible for financial aid, you may need to cover some school fees with a private student loan. These come from banks, credit unions and online financial institutions.

Here’s how to get student loans from a private lender:

  1. Shop around for several lenders. Compare loan amounts, interest rates, fees, and repayment plans. Because you will likely have a relationship with this lender for several years, make sure that they offer hardship options in case you run into financial trouble later. The lender should also have good reviews and responsive customer service.
  2. Check your eligibility. Before you complete an application, determine if your credit history and income match the credentials of the lender. Some lenders may perform a prequalification check, which allows you to see if you qualify and what potential rates you will receive, without harming your credit. If you do not meet the requirements, you will need a co-signer who can do so.
  3. Complete the request. You may need to accept a credit check and provide details like your school, tuition, type of degree, citizenship information, social security number, proof of income, and debts.
  4. Wait for verification. The lender will confirm your tuition fees with your school, which may take a few weeks. Once your school has certified the school, the lender usually pays the funds directly to the school.

Considerations before borrowing

Since student loans are a multi-year commitment, it’s important to allow time to build a long-term plan. Here are some things to consider before applying for a loan.

Private loans are subject to reservations

Even if private student loans can be a great option when you are not eligible for sufficient federal assistance, you need to understand the downsides. They are not eligible for some of the borrower protections that come with federal student loans, such as loan cancellation and income-based payment plans. Deferral and forbearance options may also vary by lender. And if the loan has a variable interest rate, it can increase at any time during repayment.

Borrow only what you need

Borrowing the minimum amount you need to pay for your education allows you to lower your monthly payments after graduation. Most schools help you estimate the cost of tuition, fees, and room and board each year. Once you know how much you need, subtract the funds you hope to get from scholarships and grants. If you need to borrow money to cover the rest, start with Federal Student Loans and move on to private loan options if necessary.

What will your monthly payments be?

Before applying for a loan, analyze the numbers to understand what you are getting yourself into. Use a student loan calculator to determine what your monthly payments will be after graduation and whether you are comfortable with the amount. Also check how long it will take to pay off the debt and how much interest you will pay over the life of the loan.

Can you pay for school differently?

Student loans, whether federal or private, must be repaid at some point. But grants and scholarships do not have to be repaid in most cases, as long as you meet the conditions. Some colleges, universities, and vocational schools offer their own financial aid, so find out about your options. You can also take a part-time job while in school to help defray school fees or rent. There are many ways to pay for college; Take a look at all of your options before committing to a loan.

The bottom line

While it’s a good idea to exhaust your grant and scholarship options first, knowing how to get a student loan is an important part of planning for college. First, fill out the FAFSA to see how much federal help you can get, then search for more options through the CSS profile. If you need to borrow more money, look for private student loans that offer affordable payment terms. The work you put into your student loan applications now can help lower your tuition costs, so you can focus on your studies and postgraduate career.

Image presented by Tatiana Frank from Shutterstock.

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