Understanding How to Get a Student Loan: A Step-by-Step Guide
Getting a student loan can be overwhelming, especially if you have never done it before. To make the process less daunting and help you understand how to get a federal or private student loan, we have created this step-by-step guide. Content provided by Credible, a firm committed to offering expert-curated and deeply-researched articles that adhere to their editorial guidelines. Note that Credible receives a fee if you click a link below and close a loan through them.
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The Step-by-Step Guide on How to Get a Student Loan
1. Research Different Loan Types
Before anything else, it’s important to understand the types of loans you might qualify for. Two types of loans are available: federal student loans and private student loans. Federal student loans are offered through the Department of Education, while private student loans are issued by private organizations.
Federal student loans typically have extra borrower protections, lower interest rates, and more lenient hardship programs, which is why they can be a better option for most borrowers. Within the federal student debt category, four types of loans are available:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans
- Direct Consolidation Loans
2. Review Your Eligibility
Eligibility criteria differ, depending on the type of loan you’re planning to apply for. For federal student loans, you’ll need to be a U.S. citizen or an eligible noncitizen, have a valid Social Security number, be enrolled at least half-time or accepted in an eligible certificate/degree program, maintain satisfactory academic progress, have a high school diploma, and demonstrate financial need (most applicable to certain types of federal funding). For private student loans, you need to be enrolled in an eligible degree or certificate program, be at the age of majority in your state, have a high school diploma, have a good credit score, and meet income and debt-to-income requirements. Adding a cosigner to your application can help if you can’t qualify for a private loan on your own.
3. Determine How Much You Need
It’s important to figure out how much funding you need to finance your education. You should only borrow the minimum amount required to cover tuition, fees, and other necessities, even if you qualify to borrow more. Take advantage of any and all grant aid sources that you might have, before borrowing student loans. The Department of Education’s College Scorecard database offers information on median earnings by major, which can help you estimate your future earning potential. Remember that your borrowing capacity might be capped by loan limits, which vary depending on the type of loan.
4. Submit an Application
The application process is different, depending on the type of loan you’re planning to apply for. To apply for federal student aid, submit the Free Application for Federal Student Aid (FAFSA) form annually. To apply for private student loans, start by researching and comparing lenders. Once you’ve figured out which lenders could offer you the best deal, fill out an application. Then, details about the school you’re attending, your anticipated graduation date, the cost of attendance, and your requested loan amount will need to be provided. Approval often entails a hard credit check, which can temporarily ding your credit score.
5. Finalize Loan and Await Disbursement
The final step is to finalize your loan and await disbursement. For federal student loans, let your school know which aid you’d like to accept and the amount you wish to borrow. If it’s your first time getting a federal loan, you’ll also have to complete entrance counseling, which goes over the rules and conditions of the loans, before signing a Master Promissory Note to accept the terms. When borrowing from a private lender, you’ll also need to review and sign the final paperwork, review the terms of your loan, and then wait for your school to certify your loan, which takes at least seven to 10 days usually. Disbursement will be sent directly to your school by either private or federal loans, and the financial aid office will apply the funds to your outstanding fees before sending any leftover cash to you.
Things to Consider Before You Borrow
Student loans make it possible for many students to afford college, but it’s important to remember that repayment will be due someday. Consider other funding opportunities before turning to loans and creating a plan for future payment. Keep the following suggestions in mind before you borrow:
- Exhaust all grants and scholarships first, as they typically don’t need to be repaid.
- Look beyond your college for private scholarship opportunities.
- Consider your future earning potential when figuring out how much you can safely borrow.
- Think about tapping into savings to help cover college costs rather than relying entirely on loans.
- Consider making interest-only loan payments while you’re in school to minimize costs down the road.
Concluding Thoughts: Understanding How to Get a Student Loan
Getting a student loan can be a complicated process, but this step-by-step guide should help you understand the different types of loans, eligibility requirements, how to determine how much you need, how to apply for a loan, and what to consider before you borrow. Always remember to exhaust all funding opportunities you have before applying for student loans and to create a plan for repayment that takes into account your future earning potential. This can help you avoid financial struggles after you complete your education.
Source: nypost.com