Paying for college is a challenge for many students. Grant and scholarship dollars only stretch so far, so borrowing money may be the only way to afford higher education.
You can get a student loan through the federal government by filling out your Free Application for Federal Student Aid (FAFSA), or you can apply with a private lender to get the financing you need. Here’s what you need to know about the process.
How to get a federal student loan
Because federal student loans come with generous borrower protections and no credit check, it’s best to apply for these first, especially if you’re an undergraduate student.
To unlock federal student loans and federal student aid, you’ll first need to fill out the FAFSA form. It’s free and comes out in October each year. Fill it out the year before you plan to attend school and reapply with a new FAFSA form each school year.
When you get your results, you’ll find out whether you qualify for subsidized or unsubsidized federal student loans. Subsidized loans are for undergraduate students with financial need. If you qualify, the U.S. Department of Education will pay your interest costs while you attend school and during deferment. You pay all interest costs with an unsubsidized loan.
Here’s are the steps for the application process:
- Set up an account. Students will need to create a Federal Student Aid (FSA) account to complete the FAFSA.
- Gather your documents. You can get a sneak peek of the FAFSA on the worksheet provided by the FSA. Compile a list of schools that should receive your FAFSA form and gather your Social Security number, driver’s license number, federal tax return, proof of income (usually with W-2 forms) and current bank statements. If you’re listed as a dependent, you’ll have to collect these materials from your parents, as well.
- Fill out the forms. The FAFSA takes about 30 minutes to complete.
- Review your SAR. After you submit the FAFSA, the Department of Education will send you a student aid report (SAR), which shows you a summary of all the information you’ve entered. Review the SAR for accuracy.
- Receive your financial aid offers. The colleges you listed on the FAFSA will calculate your financial aid and send you a financial aid letter, which may include a mix of loans, grants and work-study options.
- Accept the financial aid. Your financial aid offer may vary with each school. Once you’ve compared offers and chosen a school, contact the school to accept the financial aid. If it includes federal student loans, the school will tell you how to accept them.
How to get a private student loan
If you’ve hit your federal student loan borrowing limit or you don’t qualify for federal financial aid, you may need to cover some school costs with a private student loan. These come from banks, credit unions and online lenders.
Here’s how to get student loans from a private lender:
- Shop around with multiple lenders. Compare loan amounts, interest rates, fees and repayment plans. Because you’ll likely have a relationship with this lender for several years, it’s also a good idea to evaluate its hardship options in case you run into financial trouble later on. The lender should also have good reviews and responsive customer service.
- Check your eligibility. Before filling out an application, get a feel for whether your credit history and income meet the lender’s qualifications. Most lenders offer prequalification, which allows you to see if you qualify and what potential rates you’ll receive without hurting your credit. If you don’t meet the requirements, you’ll need a co-signer who can.
- Complete the application. You’ll typically need to agree to a credit check and provide details such as your school, cost of attendance, type of degree, citizenship information, Social Security number, proof of income and debt obligations.
- Wait for verification. The lender will confirm your cost of attendance with your school, which may take a few weeks. Once your school verifies the information, the lender typically releases the funds directly to the school.
Considerations before you borrow
Because student loans are a years-long commitment, it’s important to set aside some time to make a long-term plan. Here are a few things to consider before you apply for a loan.
Exhaust other resources first
Student loans, whether federal or private, have to be repaid at some point, and all loans come with an additional charge in the form of interest. Grants and scholarships, on the other hand, don’t have to be repaid as long as you meet the requirements.
Some colleges, universities and career schools offer their own financial aid, so ask about your options. You can also apply for scholarships and grants offered by private organizations — websites like Scholarships.com and Fastweb maintain databases of millions of opportunities for aid. You can also take a part-time job during school to help defray the costs of tuition or rent.
Borrow only what you need
Borrowing the minimum amount you need to pay for school helps keep your monthly payments lower after you graduate. Most schools help you estimate the cost of tuition, fees and room and board each year.
Use that information to create a budget to determine how much money you’ll need. Then subtract any funds you expect to get from scholarships and grants, as well as from a part-time job, if applicable. Then consider adding a small buffer on top of that.
If you’re worried about falling short, the good news is that you can change your mind later on. As long as it’s still within the same academic term, you can request to reinstate some of your unused student loan allotment.
Think about the long-term impact on your finances
Before applying for loans, crunch the numbers to understand what you’re getting yourself into. Use a student loan calculator to figure out what your monthly payments will be after graduation and whether you’re comfortable with the amount. Also check how long it will take to pay off the debt and how much interest you’ll pay over the life of the loan.
Private loans come with caveats
Although private student loans can be a great option when you don’t qualify for enough federal aid, it’s important to understand the downsides. For starters, private loans aren’t eligible for some of the borrower protections that come with federal student loans, such as loan forgiveness and income-driven payment plans.
Deferment and forbearance options can also vary by lender. And if the loan comes with a variable interest rate, it can increase anytime during repayment.
As a result, it’s usually best to consider private loans as a last resort after you’ve exhausted your federal loan allotment and have taken advantage of other forms of aid.
Other ways to pay for college
Before applying for student loans, which can end up being extremely costly, check out your other resources for paying for college.
Scholarships can come directly from your school or from an outside organization. In most cases, you don’t have to pay this money back. Exceptions can include dropping out of college, not maintaining a minimum GPA requirement or changing your major if the scholarship came from a specific program.
Check out what your school has to offer and use scholarship search engines to make the most of the opportunities that are available to you.
Like scholarships, grants typically don’t need to be repaid, though some may have requirements you have to meet to avoid that. The federal government offers grants to students who have financial need, and you may also be able to get one through your school or a private organization.
The federal work-study program provides part-time jobs to college students, both on and off campus. In some cases, schools may have agreements with third-party employers to make it possible for you to get a job in your course of study. Available work-study opportunities will be listed once you’ve filled out your FAFSA.
If you want more flexibility than what the work-study program offers, you may consider finding a part-time job on your own. Just be sure to find a job that works well with your schedule, and try to avoid conflicts with your classes and homework.
Some employers offer tuition reimbursement as an employee benefit. Depending on the employer, there may be strings attached. For example, you may need to be with the company for a certain amount of time before you qualify. The benefit is also usually capped.
The bottom line
While it’s a good idea to first exhaust your grant and scholarship options, knowing how to get a student loan is an important part of planning for college. Start by filling out the FAFSA to see how much federal aid you can get, then look for private student loans to cover any gaps in your funding.
The work you put into your student loan applications now can help you keep your school costs low — so you can focus on school and your post-college career.