How To Get A Student Loan: A Step-by-Step Guide
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If you’re up all night worrying about how you’re going to pay for college, you are not alone. Today, state tuition and fees at a public four-year college or university – traditionally the cheapest option – cost nearly $ 11,000 a year, according to the College Board.
A private, nonprofit four year college or university can cost more than $ 37,000 a year. And none of these numbers include room and board, books and supplies, transportation, and other personal expenses.
No wonder that many students apply for a student loan, which, unlike scholarships and scholarships, has to be repaid with interest. Not sure how to get a student loan? You can. Just follow these steps.
What to do before applying for a loan
Ask yourself these questions before applying for a student loan to finance your college education.
- What is the real cost of going to college? Aside from tuition and fees, add up all costs such as room and board if you live on campus, meal plans, books and supplies, transportation to and from campus, and any personal expenses you owe.
- Do you work during your studies? Getting a job can help offset college expenses. Some employers offer tuition reimbursement. Consider dual studies if your school offers one.
- Do you live on or off campus? According to Rent.com, the average cost to rent a studio apartment in 2020 was $ 1,690. A large three bedroom room that rents for over $ 2,000 a month. The average cost of living on campus ranges from $ 4,000 to $ 5,000.
- Do you intend to apply for scholarships and grants? Grants and scholarships are free money to help finance your studies. Unlike student loans, you don’t have to repay them unless your enrollment status changes or you cancel a program early. Grants are usually needs-based, while scholarships can be performance-based or need-based.
How to take out government and private student loans
If you’re like most college students, you’ll need to apply for either government or private student loans – or a combination of both – to pay for your education. It is important to understand your student loan options and the steps to apply.
Credible makes it easy for you to research your private student loan options and compare rates from multiple lenders.
Complete the FAFSA
The free application for federal study grants will be available from October 1st for the following school year. Completing the FAFSA is the first step in applying for student loans and the only way to be eligible for federal student loans.
The FAFSA uses your financial information to determine what types of government study grants you are eligible for. You must complete the FAFSA every academic year. Once your FAFSA is submitted, you may have access to several types of grants including:
- Scholarships and federal funding
- Federal Student Loans
- Federal dual study programs
- State aid
The easiest way to submit your FAFSA is online with the myStudentAid mobile app. You can also print out a FAFSA PDF 2021-22 and send it in by post.
Check your financing offer
After submitting your FAFSA and getting approval for financial assistance, any school that accepts you will send you a grant letter. You will find this in every offer.
- Participation costs (COA): This is what you can expect for a year of school, including tuition and fees, books and supplies, room and board, transportation, and other expenses such as disability or dual study expenses.
- Expected family contribution (EFC): This will determine how much financial support you will receive.
- College grants and Grants: Scholarships are usually needs-based, but scholarships can be performance-based or needs-based. Neither of these have to be repaid.
- Federal dual study programs: These programs give you a job, on or off–Campus and a paycheck.
- Federal Student Loans: Student direct loans can be subsidized (the state pays the interest while you are in school) or unsubsidized and you have to repay them when you leave school.
When deciding where to attend, you’ll need to call the school’s financial assistance office and tell them which loans you want to accept or decline.
Take federal student loans
If you need to take out student loans to cover all or part of the college’s expenses, you have two options: government and private. Because the government supports federal loans, they are often cheaper than private loans, do not require credit checks, and have income-oriented repayment plans and fixed interest rates.
Federal loans may be eligible for loan waiver. So if you’re struggling to make your payments, you have more relief options than with private loans.
Federal direct loans may or may not be subsidized. Both offer benefits such as low interest rates, flexible repayment options, deferral and deferral programs, and the ability to consolidate your loans. But there are some key differences between the two.
- For students only
- Requirements-based requirement
- Lower credit limits
- Interest is subsidized in the case of deferrals
- Students and graduates are eligible to participate
- No need-based requirement
- Higher credit limits
- Interest is not subsidized in the case of deferrals
There are three main types of federal student loans: Direct Subsidized, Direct Unsubsidized, and Direct PLUS Loans.
Directly Funded Loans
Students who can provide evidence of financial need can apply for direct subsidized loans. These loans usually do not charge interest while you are in school or during grace or grace periods. Interest does not accrue if you are at least halfway through school, but it accrues when you finish school or fall below halftime.
Allocation limits for directly subsidized loans: up to USD 5,500 annually (subject to change)
Direct unsubsidized loans
Direct unsubsidized loans are unsecured (meaning you don’t need collateral to qualify) and are federally funded. You don’t need to demonstrate financial need or have a good credit score to qualify for one. Interest rates are based on your level of education and start borrowing. You pay monthly payments to the Department of Education after a six-month grace period so that you have time to find a job.
Allocation limits for direct loans: up to $ 20,500 per year, less any subsidized loans received over the same period (subject to change)
Direct PLUS loan
Direct PLUS loans help you pay for costs related to your education that are not covered by other financial aid. They are available to graduates as well as professionals, as well as the parents of dependent students. You don’t need to provide proof of financial need, but your creditworthiness will be taken into account when calculating the loan amount. You make your payments to the U.S. Department of Education.
Lending Limits for Direct PLUS Loans: Participation costs (as determined by the school) minus any other financial aid received
Consider a co-signer
It’s no secret that students who need a loan to pay for all or part of their education are more likely to get better rates and terms when they have a co-signer.
Borrowers who checked interest rates with a co-signer received loans at interest rates that were, on average, 2.36 percentage points lower than those available to borrowers without co-signers, according to a data analysis by Credible.
While you usually don’t need a co-signer to get a government student loan, it can help you get a better interest rate.
And because banks, credit unions, and other financial institutions offer private student loans, your creditworthiness is important. If you have little or no credit history, it can be difficult to qualify for a personal student loan. A co-signer with good or excellent credit can help as it makes it easier to get your loan approved, often at a lower interest rate. Choose someone you know and trust, such as a parent, guardian, spouse, sibling, or friend.
Compare private student loans
Before you take out a private student loan, it is best to exhaust all federal loans, scholarships and grants, as well as dual study programs, before you apply. The interest rates on personal student loans are typically higher than those on state student loans.
Private lenders have their own methods of scoring applications so benchmark purchases are the only way to know if you qualify. It is also the easiest way to ensure that you are getting the best interest rates. By shopping, you are also showing your co-signer that you have invested the time and effort, which can help them take the risk associated with signing your student loan.
Credible allows you to compare student loan interest rates from multiple lenders.