How To Get a Student Loan: Everything You Need To Know
Getting a higher education is more expensive than ever, as tuition fees have more than doubled over the previous two decades. If your parents haven’t stashed away some money in a savings account and you don’t qualify for a scholarship, you’ll likely have to take out a student loan.
In this blog post, we'll tell you how to get a student loan, go over several different types of student loans, and cover the most important factors you need to consider when getting this type of financial aid.
How To Get Student Loans
If you decide to borrow money to finance your college education, you’ll have a choice between federal loans and private student loans. Federal student loans are funded by the US Department of Education.
Meanwhile, private student loans are available through private lenders - banks, credit unions, and other financial institutions.
Student loans provided through the federal government come with a few perks, such as low fixed interest rates, forgiveness programs, and generous deferment options. But if you're a graduate student or a parent trying to bankroll your child’s college education, private student loans are worth considering.
Federal Student Loans
If you are wondering how to get federal student loans, you’ll be glad to hear that the process is relatively straightforward. To apply for a federal student loan, you’ll need to fill out and submit the Free Application for Federal Student Aid, or FAFSA.
The FAFSA is a form that collects information about your financial situation and other relevant matters that affect your eligibility for federal loans and other forms of federal aid. This information is used to determine how much of the college tuition can be covered by the applicant.
You can apply for a federal student loan online by filling out a free application. Simply visit the Federal Student Aid website and provide the necessary information. The application process for private student loans is slightly different, but more on that below.
Info Requirements for the Federal Student Loan Application
To apply for student loans, you’ll need to provide your Social Security number, date of birth, and the name and address of the college you plan to attend. You’ll also need to provide information about your parents' income and assets.
If you are considered a dependent, your parent's information is required. If you are considered an independent student, you’ll only need to provide your own information in order to apply for federal financial aid.
Once you have submitted the FAFSA, the government will determine how much money eligible undergraduate students can receive in federal student loans. The FAFSA application is updated every year with student loan requirements.
You’ll need to submit a new FAFSA form for each academic year that you wish to receive financial aid.
The information you provide in your FAFSA application is used to calculate your Expected Family Contribution or EFC. This is the amount of money the government expects you to contribute to your college tuition, with the rest being covered by federal aid.
In addition to getting a loan for college, you can reduce your costs through aid packages offered by institutions where you apply. Colleges determine how much aid applicants need by subtracting the EFC from the tuition and other major expenses.
Some institutions also offer grants which are typically reserved for students with specific needs in regard to financial aid.
When getting loans for college, it’s important to weigh your options carefully. There are two types of loans available from the federal government: subsidized loans and unsubsidized loans.
Direct subsidized loans are need-based loans. The Department of Education pays the interest on subsidized federal loans while you're in school and during the six-month grace period. You don't have to begin repaying subsidized loans until after the grace period.
Direct unsubsidized loans are not need-based. You are responsible for the interest from the time the loan is disbursed until it is paid in full. The interest on unsubsidized federal loans can be capitalized (added to the principal amount of your loan) when you enter repayment.
How Much Can You Borrow?
The amount of money you can take out with a student loan from the government depends on a range of factors, such as whether you're a dependent or independent student. Of course, there are limits on how much you can borrow each year and in total.
If you're a dependent student, you can borrow up to $5,500 for your first year of study. Of that amount, a maximum of $3,500 can be subsidized.
If you need more money, you can get it through the federal Direct PLUS Loan, which is lent to parents who are paying for their children’s education. They are unsubsidized loans, meaning that their interest starts to accrue immediately. The interest rate for this loan is 7.54% for the 2022-2023 school year.
To get a PLUS loan, the parent will need to fill out and submit the FAFSA form. For those who don’t know where to get a student loan of this type, the Federal Student Aid website provides all the relevant information.
PLUS loans require a credit check, meaning that individuals with poor credit are less likely to be approved. However, the government is not that strict when it comes to negative items on the applicant’s credit history.
Be sure to submit your FAFSA form on time so you don’t miss out on any opportunities for financial aid. Still, if you are not eligible for a federal loan, a private student loan is another option.
How To Get a Private Student Loan
Private student loans can be used to cover a variety of expenses, including tuition fees, but private lenders usually have higher interest rates than the government does when issuing federal loans.
To get a private student loan, you’ll need to fill out and submit a loan application. As you’d expect, this involves a credit check, and if you don’t meet the lender’s requirements, you’ll need a co-signer with a good credit history.
That said, the borrower’s credit history plays a major role in determining whether or not they qualify for a private student loan, and it also affects the interest rate. Getting a student loan with bad credit is still possible because there are lenders that provide private student loans for borrowers with a less-than-perfect credit score.
The main downside of private student loans is that they are more expensive than federal loans. They come with higher, variable interest rates that cost more in the long run.
When you compare private student loans and different private lenders, be sure to look at the interest rate, the repayment options, and whether there are any additional fees.
What Should You Consider When Taking Out a Student Loan?
The institution you choose for your education has a big impact on how much money you need to borrow. Obviously, attending a more expensive school will require you to take out a larger student loan. Here are a few things to keep in mind.
Choose the School Carefully
Although you shouldn't choose a college solely based on the costs, you still need to think about the aid packages and the student loans you can get. If you graduate with too much student loan debt, your health and professional life can suffer.
Before taking out loans for college, you should have some idea of what you want to do in life and remember that careers with good entry-level salaries can help you pay off your debt faster.
Borrow the Amount You Need
It can be tempting to take out the maximum amount that you're eligible for with your student loan. But remember, you'll have to pay all of that money back with interest. So, only borrow as much as you need and try to find other ways to reduce the cost of your education. You can also apply for financial aid that helps with tuition fees and covers accommodation.
Look for Good Repayment Terms
One of the most important factors to keep in mind when applying for a student loan are the repayment terms, and there are a few options to choose from.
For federal loans, standard student loan repayment involves fixed interest rates over a period of 10 years, and it’s the most common way people pay back their student loans.
Those who anticipate that their income will gradually increase over time can opt for a graduated repayment plan instead. With this plan, the monthly installments are initially low and increase over time, allowing individuals to pay their debts back quicker and thus save money in the long term.
These are the two most common ways to repay federal student loans, although there are other options that students can qualify for based on the type of loan they opt for and whether they meet certain requirements.
With private student loans, the options are usually less flexible. While full loan deferment is an option, many students start repaying their private loans while still in college.
This can take the form of smaller initial fixed payments or interest-only payments, although some have to start making both principal and interest payments immediately upon student loan disbursement.
What Are the Advantages of Federal Loans Over Private Loans?
The best way to get student loans is through government programs. Most federal student loans offer plenty of advantages, including flexible payment plans and lower interest rates than those you get with private student loans. Also, if you can't find a job after graduation or you encounter other financial difficulties, you can defer your federal student loan payments.
What's more, if you work in certain public service jobs, you might be eligible for student loan forgiveness. This means that, after making a certain number of payments, the government will forgive the remaining balance on your loan.
If you’re trying to figure out how to apply for student loans without a good credit score, remember that federal loans aren’t as demanding in this respect as private ones. So, if you don't have a good credit score or any credit history at all, you can still qualify for federal student loans.
In short, federal student aid offers more benefits and protections than private loans do. However, this doesn't mean that private loans are bad.
They can even be a good option if you need to supplement your federal loans. Just make sure to do your research and compare private lenders before applying for a private student loan.
The Bottom Line
Knowing how to qualify for student loans is important for all future college students, especially those who don’t qualify for grants and scholarships.
The first step is to file FAFSA and to get in touch with your financial aid office. After that, you’ll want to start researching lenders and comparing rates in order to find the best student loan offer.
Additionally, if you don’t qualify for a federal loan, you should research private student loan offers in order to find the one that best suits your college costs and other education expenses.
It goes without saying that you should aim for the lowest interest rate and the most favorable repayment terms - the sooner you can get rid of student loan debt, the better.
How do you qualify for a student loan?
To get student loans, the first thing you need to do is decide whether to apply for a federal or a private student loan. In the case of the former, the first step is to file the FAFSA application form. After getting offers from the schools you applied to, you need to choose between subsidized and unsubsidized loans. When it comes to private student loans, you need to pass a credit check.
What are the 4 types of student loans?
The four most common types of student loans are direct subsidized and direct unsubsidized loans, PLUS loans, and consolidation loans.
Is it hard to get student loans?
No, federal student loans are not hard to get. The application process is straightforward. Our article tells you how to get a student loan and the different options available. Private student loans can be more difficult to obtain, as private student lenders are more demanding when it comes to the borrower’s credit score.
Can student loans be forgiven?
Yes, student loans can be forgiven in certain cases. Federal student loans come with loan forgiveness programs. However, unlike a federal loan, private student loans can’t be forgiven.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.