Pursuing higher education in the United States can be a costly affair. The expenses can add up quickly, from tuition fees to housing and textbooks, making it challenging for students to afford a college education.
Fortunately, student loans are available to help students pay for their education. In this blog post, we will discuss how to apply for a student loan in the US and the benefits and eligibility requirements that come with it.
Overview Of Student Loans
A student loan is a type of financial aid designed to help students pay for their education expenses. Unlike scholarships or grants, student loans must be repaid with interest over a specified period.
Many students rely on student loans to finance their education, and various types of student loans are available. As of 2023, there is $1.75 trillion in student loan debt in the country, with the average loan per student at $37,574. President Biden has announced a student loan forgiveness program to forgive up to $20,000 in student loans for qualified borrowers.
Types Of Student Loans
There are two main types of student loans: federal and private. Federal student loans are provided by the government and typically have lower interest rates and more flexible repayment options. Private student loans are offered by credit unions, banks, and other financial institutions and may have higher interest rates and stricter repayment terms.
Within the federal student loan category, several loan programs are available:
- Direct Subsidized Loans: These loans are available to undergraduate students with financial needs. The U.S. Department of Education pays the interest on these loans while the student is in school, during the grace period, and during deferment periods.
- Direct Unsubsidized Loans: These loans are available to both undergraduate and graduate students. Unlike subsidized loans, students do not need to demonstrate financial need. Interest accrues on these loans from the moment they are disbursed, and students need to pay all interest that accrues while they are in school, during the grace period, and deferment periods.
- Direct PLUS Loans: These loans are available to graduate students and parents of dependent undergraduate students. PLUS loans require a credit check, and the borrower must not have an adverse credit history. The interest rate on PLUS loans is fixed and may be higher than the interest rate on other federal student loans.
- Federal Perkins Loans: These loans are available to undergraduate and graduate students with exceptional financial needs. Perkins loans have a fixed interest rate, and the U.S. Department of Education is the lender. Unfortunately, the Federal Perkins Loan program ended in September 2017, but students who received loans before that date may still be eligible for forgiveness or cancellation.
It's important to note that the loan limits, interest rates, and repayment terms for each type of loan may change from year to year, so it's essential to check the current information before applying. Additionally, each loan type has different eligibility requirements. Therefore, students should work with their college's financial aid office to determine which loans they qualify for and best fit their financial situation.
On the other hand, private student loans are not backed by the government and are based on the student's creditworthiness. Private loans may have variable interest rates, which can fluctuate over time. They are also not covered by the government’s debt relief program.
How To Apply For A Student Loan
To apply for a student loan, students must first complete the Free Application for Federal Student Aid (FAFSA) form. The FAFSA determines the student's eligibility for federal student aid, including grants, loans, and work-study programs.
Once the FAFSA is complete, students can apply for federal student loans through their college or university's financial aid office. Students must undergo a counseling session to ensure they understand the loan's obligations. They will also sign a Master Promissory Note to signify that they agree to the loan terms.
Private student loans are typically applied for through the lender's website or by speaking with a loan officer.
Benefits Of Applying For A Student Loan
One of the significant benefits of applying for a student loan is that it can help students finance their education without having to pay for it all upfront. In addition, student loans can also help build credit, as timely payments can positively impact credit scores.
Furthermore, some federal student loan programs offer loan forgiveness options for eligible borrowers who work in specific industries or for certain employers. Private student loans may offer loan forgiveness options but may be limited.
Student loan eligibility requirements vary depending on the loan program. The students must also be enrolled at least half-time in an eligible program at an accredited college or university. They must also be US citizens, permanent residents, or eligible non-citizens and not have defaulted on any previous student loans.
Private student loan eligibility requirements typically include a good credit score, income verification, and a co-signer, as many students may not have an established credit or income history.
How To Apply For A Student Loan: The Takeaway
Applying for a student loan can be a crucial step in financing a college education, and it's essential to research the different types of loans available and their eligibility requirements before applying. Completing the FAFSA is a critical first step in determining eligibility for federal student loans.
Students can then apply for loans through their college or university's financial aid office or directly through private lenders. By understanding the loan terms and repayment options, students can make informed decisions and plan for the future.
If you are looking for student loans, visit our article about the best student loans for college to know more.
Learn about government grants that can help you pay for student loans in our blog.