Applying for college can be an exciting time in any student's life. After getting accepted, the initial excitement may wear off as you begin to wonder how to pay for tuition, room & board, food, and books. After factoring in scholarships and grants, you may be left with a balance due to pay. Luckily, there are plenty of student loan options out there. You just need to know how to get a student loan, first.
Student loans are a great way to easily fund your education, without footing the bill while you're in school. Not all student loans are the same, but all serve a general purpose: to help you fund your education. In order to find out how to get a student loan and which option is right for your situation, let's first look at the different types of student loans available.
Types of Student Loans
There are many different types of student loans out there, but not all types are right for each student's educational situation. The amount you're borrowing, the field you're majoring in, and how soon you expect to start paying your student loan back are all important factors to consider when choosing a student loan type.
Here are the most popular student loan options:
Government Funded Loans
Government funded loans are popular options that many students take advantage of. These loans often have the lowest interests rates and some are even offered in subsidized formats. Subsidized loans allow students to pay off interest while they're in school, so that once they graduate, their total owed is much lower.
If you're worried about how to get a student loan, you'll find relief with government funded loans. These loans do not require a credit check, which is great for students who are just starting out and likely do not have any credit. These loans also have other advantages, such as flexible repayment plans and the ability to pause loan payments while searching for a job.
The main drawback to government funded loans is that there is a limit to have much money you can borrow. While this limit varies, if you are looking to fund a large percentage of your college education through loans, government funded loans may not cover all expenses.
When government loans won't fulfill your expenses, or if for some reason you do not qualify for government funded loans, private loans are another option. These loans are generally funded through banks and private investors. These loans typically are provided after a credit check, which requires students to have a fair to good credit score.
Since students generally don't have credit yet (some may not even be 18), these loans typically require the help of a co-signer. A co-signer is an adult who can apply for the loan with the student, allowing the bank or financial institution to use their credit score to help back the loan. This requires a student to work out a deal with a family member or trusted adult to figure out who will ultimately pay back this type of loan.
Private loans generally offer more flexibility as far as loan amounts but generally have higher interest rates when compared to government funded loans. However, they are easy to apply for and typically funded quickly.
Sources of Student Loans
How to get a student loan completely depends on the source of student loan you choose. Sources of student loans generally fall under the two main types of loans outlined above. However, these broad categories can be further broken down into more distinct loan types.
Federal Student Loan Types
There are three types of federal student loans: the Federal Stafford Loan, the Federal Perkins Loan, and the Federal Plus Loan. All three of these loans are funded by the government, but the criteria and stipulations of these loans are all a little different.
1. Federal Stafford Loan
This is the most common federal loan that students will find out if they are eligible when filling out the FAFSA. There are two types of Stafford loans: subsidized and unsubsidized. Subsidized Stafford loans are generally more need-based, and the government pays the interest on these loans while the student is in school. Unsubsidized Stafford loans do not have this perk but are more available to students who may not qualify for need-based aid. Repayment often starts six months after graduation.
2. Federal Perkins Loan
This type of loan is typically offered to students from low-income families after they have filled out the FAFSA. These loans typically have extremely low interest rates, but they can negatively impact a student's credit score if not paid back in time. Repayment typically starts six months after graduation.
3. Federal Plus Loan
This loan is solely based on an individual's credit score and can be applied for if a student does not qualify for a Stafford or Perkins loan. Another form of this loan, the Parent Plus Loan, can be utilized using the parent as a co-signer if an individual does not qualify based on their own credit score. Repayment typically starts immediately after graduation, with no six month grace period.
Private Student Loan Sources
Private loans sources are more plentiful than federal loan options. These loans are typically offered by most banks and financial institutions as well as online-only student loan providers. Unlike federal student loans, private loans typically have higher interest rates and will always impact a student's credit score. In general, it is recommended that students only apply for private loans if they are unable to qualify for government loans. Many students also apply for private loans if government loans won't cover their full educational expenses.
Most private loans allow students to borrow more money than federal loans offer. Students will also have a much better chance of receiving a private loan if they apply with a co-signer who has a good credit history. While private loans aren't often preferred, they can be helpful for students with no other financial options.
How to Get a Student Loan
Now that you know the differences between the types and sources of student loans, you might be wondering how to get a student loan. The process of how to get a student loan isn't clear cut in every scenario, but this guide can help get you started.
Fill Out the FAFSA
Even if you think you won't qualify for grants or government loans, filling out your FAFSA is important. This online financial program will take a look at your financial needs and help match you with the best financial resources available to you.
After filling out the FAFSA, you'll receive a financial award letter either directly from FAFSA or the school you're enrolled in. You'll also receive instructions on how to accept your awards (which include loans). Often times, this can be done online, but sometimes it requires contacting your school's financial aid office. You can also contact them before accepting if you have any questions about your award letter.
Even if you only qualify for a small government loan, that federal loan will allow you to potentially borrow less from private lenders, saving you money down the road.
Shop Loan Rates
If you need a private loan, do some research beforehand to figure out the best private lender for your situation. There are many services out there proclaiming to offer the best student loan rates, but it's important to do your homework to ensure you're borrowing money from a credible source without any hidden fees or terms.
You can reach out to your school directly for resources, but you should also enlist help from a parent to help double check the best loan rates and repayment terms. There are many loan comparison tools online that can help you compare similar-looking loans to help make the best decision. Alternatively, you can also visit your banking institution or credit union to find out what options and loan rates are available to you before committing to a lender.
When you're finally ready to apply, most lenders offer an easy online application process which will require information from your co-signer (if you're applying with one). You can also apply in-office at your bank if you decide their rates and repayment terms are the best available to you.
No one likes to think about student loans, but for many they are the most reasonable and realistic solution to paying for a college education. How to get a student loan varies depending on the type of loan you're seeking. It's always best to fill out your FAFSA and accept any government-funded loans offered to you before searching for a private loan. Getting a student loan from a private lender is often pretty simple: most lenders offer a quick online application process.
Be sure to talk to a parent, family member, school resource, or other trusted advisor before applying for a student loan. Ask someone to double check your loan research so you can rest assured that you're making the best decision for your future.