When paying for college, many students turn to student loans to finance their education. The average cost of a college education is now $35,551, including books, supplies, and living expenses. Furthermore, this figure grows by 7.1% annually, making college an expensive investment for many and student loans a necessary resource.
However, applying for a student loan can be daunting, especially if you're unfamiliar with the different types of loans available or the eligibility requirements you'll need to meet.
This article explains the student loan application process and what you need to know to get started.
Quick Look On Student Loans
A student loan is designed to help students pay for their education and is typically offered by the federal government and private institutions.
Unlike other types of loans, such as car or home mortgages, student loans are typically deferred while the borrower is in school, meaning you won't have to repay the loan until after graduation.
Student loans can be used to pay for tuition and fees and other educational expenses such as room and board, textbooks, and transportation.
While they can be a valuable resource for students who need help paying for college, it's important to remember that student loans are a form of debt, and you'll need to repay them with interest over time.
Different Types Of Student Loans
There are two main types of student loans: federal loans and private loans.
The federal government offers loans that typically have lower interest rates and more flexible repayment options than private loans. On the other hand, banks, credit unions, and other private lenders offer private loans and may have higher interest rates and more strict repayment terms.
Federal loans are classified into three types:
- Direct Subsidized Loans are awarded based on financial need, and interest is not charged while you’re in school.
- Direct Unsubsidized Loans are not based on financial need, and the interest accrues on these loans while you're in school.
- Direct PLUS Loans are available to graduate students and parents of undergraduate students. They require a credit check and may have higher interest rates than other types of federal loans.
Private student loans can be taken out directly by the student (co-signed by a parent) or taken out by the parent to pay for their child’s college tuition.
Loan Terms Available
When applying for a student loan, you'll have several different loan terms to choose from. For example, you can choose from five, seven, 10, 15, or 20 years. In addition, for federal loans, you can choose an income-driven repayment term or an extended repayment term.
Short-term loans incur the least interest but have higher monthly payments. The reverse is true for long-term loans.
Process Of Loan Application
The student loan application process will vary depending on the type of loan you're applying for. Here are some general steps you can expect to take when applying for a student loan:
1. Fill out the Free Application for Federal Student Aid (FAFSA)
This form is required to apply for federal student loans and many types of financial aid. The FAFSA collects information about your income, assets, and family size to determine your eligibility for need-based aid.
2. Research loan options
Once you know what types of loans you're eligible for, research the different loan options available. Look at interest rates, repayment terms, and any fees or penalties associated with the loan.
3. Complete the loan application
Once you've chosen a loan, you must complete the loan application. This includes submitting additional documentation, such as proof of income or academic transcripts.
4. Wait for loan approval
Depending on the type of loan you're applying for, it may take several weeks or even months to receive approval for your loan.
5. Accept the loan
Once your loan is approved, you must review and accept the loan terms. Read the fine print carefully and make sure you understand the repayment terms before accepting a loan. Once accepted, the funds will be disbursed directly to your school or to you, depending on the type of loan.
Eligibility Requirements
The eligibility requirements for student loans will vary depending on the type of loan you're applying for.
Undergraduate Students
Undergraduate students are generally eligible for federal student loans, regardless of their credit history or income. To qualify for federal loans, you must meet the following criteria:
- Be enrolled in an eligible degree or certificate program
- Be a U.S. citizen, national, or eligible non-citizen
- Have a valid Social Security number
- Be registered with the Selective Service if you're a male between the ages of 18 and 25
- Maintain satisfactory academic progress
- Not be in default on any other federal loans
- Demonstrate financial need (for need-based loans)
Graduate And Professional Students
Graduate and professional students are also eligible for federal loans, as well as private loans. To qualify for federal loans, you must meet the same requirements as undergraduate students. To qualify for private loans, you'll need a good credit score and a steady source of income.
Permanent Residents
Permanent residents are also eligible for federal and private loans. The eligibility requirements are the same as the ones above, except you need a valid Green Card visa.
Frequently Asked Questions:
Start by filling out the Free Application for Federal Student Aid (FAFSA), which will determine your eligibility for federal loans, grants, and work-study programs.
Yes, you can apply for federal student loans and some private loans without a co-signer. However, a co-signer may be required for most private student loans if you don't have an established credit history.
The best time to apply for student loans is after you've exhausted free funding options (scholarships, grants) and have received your financial aid award letter. It's also important to meet the FAFSA deadline, which is June 30 each year.
Takeaway On Student Loan Application
Applying for a student loan can be a complex process, but with a little research and preparation, you can navigate the process successfully. Before considering private loans, check your eligibility for federal loans first. Always compare interest rates, repayment terms, and fees, and carefully review and understand the loan terms before accepting the loan.
Remember that taking on student loan debt is a major financial decision with long-term consequences. Before applying for a loan, consider how much debt you can reasonably afford to take on and how that debt will impact your financial future.
Try to explore other options for paying for college, such as scholarships, grants, and work-study programs. By combining these options with student loans, you can reduce the amount of debt you need to take on to pay for your education.
Read about how to apply for student grants in our blog.
