How To Get A Student Loan
Few students right out of high school can afford to cover the cost of attending college or university. While scholarships are great if you can get them, what do you do if you can’t? That’s where student loans come in. We’ll break down the two major types of student loans available and get you up to date on what you can expect when applying for each.
What Is a Student Loan?
Perhaps it’s one of the ironies of modern life that while a college education is one of the most expensive purchases you’ll probably ever make, you’re required to pay for it right after you get out of high school. By the age of 18, few of us have earned enough money to make anywhere near the amount that even the first year of the average college education costs.
So how does anyone ever afford to earn a degree? Unless you’ve earned a full scholarship, are an older student, or have a family who offers to pay your way, student loans are one of your best options. A student loan involves finding a lender who is willing to loan you the money for college now and let you pay them back (with interest) over time.
Types of Student Loans
When it comes to funding your college education via the student loan route, you’ll have two main options: federal or private loans. Federal loans are loans you can get from the government and are generally your best bet if you can get them.
Private student loans are those offered by banks, online lenders, credit unions, and some state-based agencies. The important thing to keep in mind here is that some come with much better interest rates and terms than others so be sure to shop around if you do decide to apply for one.
How to Get a Student Loan
Federal student loans are generally easier to get than private loans. They don’t require co-signers or credit history and come with perks that many private loans may not. Not only do they tend to offer lower interest rates, but they sometimes offer protections such as income-based repayment options or in some circumstances even loan forgiveness.
Applying for private loans mostly involves supplying whatever information that the potential lender requires. This usually includes things like:
- Your basic info- Name, address, social security number, etc.
- Information about the school you want to study at, your enrollment status and year, and sometimes your desired course of study.
- The amount you want to borrow
- Employment and financial information if available
- A co-signer if you don’t have an established credit history
Where Can You Get a Student Loan?
When it comes to where to get student loans, FAFSA is always a great place to start. You can submit an application for free to find out about any Federal Student Aid you might qualify for, such as scholarships, work-study programs, and grants. The great thing about these types of awards is that they don’t have to be repaid. A FAFSA application will also serve as an application for any federal student loan you may wish to borrow.
If you decide to go the private loan route to cover some or all of your expenses, you’ll have a bit more research to do as far as finding a credit union, bank, nonprofit, or other lenders to apply to directly.
Student Loan Process
Once you apply for student aid and loans through FAFSA, then each college you apply to will use your FAFSA information to determine how far any aid or loans you’re offered will go towards covering your tuition. If you end up getting into a college, they’ll send you information about how much you’ve been awarded or approved to borrow in your acceptance letter.
Private loans work a bit differently in that once you’ve completed your application, they’ll look into your (and, if applicable, your cosigner’s) credit history. In some instances, they may require additional information before approving your application. Once they do, however, they’ll go over the terms of the loan with you, including how much interest you’d be required to pay and your various repayment options.
If you agree to the terms of the loan, you (and if necessary, your co-signer) will sign it to indicate your acceptance. The lender will then generally reach out to your school of choice to verify your eligibility, enrollment, and loan amount. They’ll then send the loan directly to your school to cover your tuition expenses. If there’s any money left over, the school will pass it along to you.
Student Loan Requirements
Federal student loans through FAFSA come with a few requirements aside from filling out and submitting a free student aid application. When your school notifies you of your acceptance, they’ll also provide you with information that covers how to go about accepting all or part of the federal student loans you’ve been offered.
To get the loan, you’ll have to :
- Complete an entrance counseling session. This is basically to ensure that you understand all your obligations as far as when and how you’ll repay the loan in the future, as well as its terms. Use this session to your advantage and don’t be shy in the slightest about asking any questions.
- Sign a Master Promissory Note. Your signature will verify that you understand the terms of the loan and agree to repay it.
The requirements for a private loan are a bit different and may vary depending on which lender you chose to go with. In general, however, most private student loans will depend on requirements based on things like:
- Age, education, and citizenship status
- Your enrollment status in an eligible school
- Your (or your cosigner’s) credit history and income
- Your intention to use the loan solely for educational expenses
How Much Can You Get From a Student Loan?
The amount you can get from a federal loan depends on several factors:
- If you are an undergraduate student, you can borrow a maximum of $5,500 to $12,500, depending on your dependency status and what year of school you are in.
- If you are a grad or professional student, you can borrow up to $20,500 each year and may also be eligible for Direct PLUS loans.
- If you are a parent of an undergrad student who is a dependent, you can apply for a Direct PLUS loan, which will cover any remaining costs of your child’s education not already covered by student aid.
Private loan amounts vary but generally cap out at the total amount required for attendance as certified by your school, minus any student aid.