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Multiyear student loan approval gives you the chance to see your borrowing limit for the entirety of your education. You apply once and get approved for loans over the course of your entire degree program.
Knowing how much you can borrow each year can be helpful for planning your finances over the years you’re in school. However, before you apply for multiyear approval, you need to understand how it works and whether there are drawbacks to consider.
What is multiyear approval for student loans?
Instead of having borrowers apply for a loan each academic year before classes start, some private lenders offer borrowers a multiyear approval option for their student loans.
Mindy Hager, senior vice president of Student Lending at Citizens Bank, says that when students and their families fill out their application, the lender will look at them holistically, instead of focusing just on what they can afford today.
“If a family comes during the student’s freshman year and are looking to borrow $15,000, for example, we’ll check if they can support that amount through basically a four- or five-year period,” Hager says. “Then we will approve them for that full amount of $15,000 times four or five, so we’re going to tell them, ‘You have $60,000 or $75,000 that is available for the entire education of that borrower.’”
Of course, the lender won’t give you the full amount in a lump sum, just the amount you requested for that academic year, which in this example would be $15,000. But you have the certainty of knowing that you can come in the next few years and apply for any amount up to that $60,000 or $75,000 cap, and you’ll get approved — as long as your credit score and financial situation stay more or less the same.
It’s also worth noting that even though you’ll be preapproved for the funds, your interest rate and terms won’t necessarily be the same for all your loans. You still have to choose a type of interest (fixed or variable) and a repayment term for each loan you request under the multiyear option.
Additionally, interest rates from private lenders fluctuate according to market conditions, meaning that even if your credit score and income remain the same (or even better), there’s always a chance that you won’t be able to get the exact same rate you originally secured.
Lenders that offer multiyear approval
Not every lender offers multiyear approval, and those that do each have their own version of this feature.
With Citizens’ Multi-Year Approval, borrowers can complete the student loan application online or on the company’s mobile app. Once you complete the form, the system will automatically tell you if you’re eligible for the multiyear approval. From there, you just need to tick the box accepting this option and sign the papers.
It is also worth highlighting that Citizens Bank allows you to take your loans with you, meaning you can switch colleges and still be approved for the multiyear option. However, to remain qualified, you’ll have to apply using the same co-signer each time and pass a soft credit check.
College Ave Multi-Year Peace of Mind will inform you if you’re eligible for multiyear approval during the online application process. At that time, you’ll also be able to choose the type of interest you want for that first loan and the repayment term.
However, to remain preapproved for future loans, your school must verify that you meet its satisfactory academic progress guidelines. You’ll also need to pass a soft credit check.
Discover tells borrowers whether they’re approved for its Multi-Year Option during the loan application process, which can be done online or over the phone. In future years, much of the loan paperwork will already be prefilled.
Discover requires that you use the same co-signer and pass a soft credit check to remain prequalified, and you must be in the same school and program you listed on your first application.
While Sallie Mae does not have an official multiyear approval program, it does have a Multi-Year Advantage – meaning that borrowers who reapply for a Sallie Mae loan with a creditworthy co-signer have a high approval rate year over year. Unlike with other multiyear approval programs, you will still need to submit an application and go through a hard credit check every year, but the program could give you peace of mind when you apply for future years of funding.
What are the benefits of using one lender for all student loans?
Having all your loans under the same umbrella comes with some perks, including:
- Faster approval. Your lender will already have your information on file, and each application will be prefilled. You just need to verify that the information is still accurate, sign the papers and you’re done.
- Less impact on your credit. Hard credit inquiries can make your credit score drop by as much as 10 points and can stay on your report for up to two years. David Green, CEO of Earnest, says that by selecting the multiyear approval, you avoid further dents in your credit score, as the lender will only do a soft credit check for all future loans.
- More savings. Most lenders offer a standard interest rate discount of 0.25 percent for signing up for automatic payments. But if you’re a returning borrower, you may be eligible for additional loyalty discounts and rewards. For example, Citizens Bank offers a loyalty discount of 0.25 percent on each subsequent loan you take out with the company.
- Easier repayment. Using the same lender allows you to manage and pay all your loans in a single hub, so you don’t have to bounce from one lender’s website to the next. This can also be useful if you decide to refinance, as you won’t have to get statements from multiple lenders.
What are the disadvantages of using the same lender?
While using the same lender for all your student loans can be convenient, there are drawbacks to consider, such as:
- Potentially higher rates. You won’t be shopping around each year, so you could miss out on a good deal from another lender.
- No guarantees. The idea behind multi-year approval is that you can draw funds each year. However, the fine print of these agreements usually gives the lender the option to decline future loans if your credit or finances change.
- Private loans aren’t subsidized. If you can get government loans, you should use those before private loans.
How to apply for multiyear approval
Applying for multiyear approval is pretty straightforward. You need to select a lender that offers this option and have the following at hand to fill out the application:
- Your school’s information.
- Your anticipated graduation date.
- Your requested loan amount.
- The academic period you’ll need funding for.
- A copy of your passport, your license or another state-issued ID.
- Your Social Security number.
- Your contact information.
- Copies of your two most recent pay stubs, W-2s or tax returns (if applicable).
- Your employer’s contact information (if applicable).
If you’re applying with a co-signer, you’ll also need to include that person’s name, contact information, Social Security number, income and employment details. Some lenders may also require you to provide one or more personal references as part of the application process.
Using this information, the lender will determine whether you’re approved for the loan and your eligibility for multiyear approval. If you’re eligible for multiyear approval, you can select the multiyear option before signing on the loan.
How to request funds for each school year
Hager says that once your academic year ends, the lender will contact you to know whether you’d like to request another loan for next year. If you haven’t received the bill from your school by the time you get the call, don’t fret — you can always apply later.
Once you crunch down the numbers and see how much you’ll need, go to your lender’s page and log into your account. There, you’ll see the option to request another loan under your multiyear approval plan. This new application will already be prefilled for you using last year’s information.
As a final step, the lender will do a soft credit check to make sure that your financial circumstances haven’t drastically changed over the last year. If everything checks out, you’ll get approved for the funds and the money will be sent to your school.
The bottom line
Multiyear approval can be a great thing for people who want to plan ahead and know what resources are available to help them pay tuition in future years. However, you lose out on the opportunity to shop around for a better deal.
As with any college plan, consider all your options, including scholarships, grants, and federal loans to help pay for school, and choose the one that’s right for you. If multiyear approval is the right move for you, contact a lender to start the application process.