How to Apply for Student Loans

apply for student loan

Investing in college may be costly. A good quality education could be valuable. Many students may not have the funds on hand to pay for their education right away. That is why student loans may be available. Financial aid may be available for those who qualify. It may be confusing to learn how to apply for a student loan. Here is some info to help with the process.

What Is a Student Loan?

Student loans are typically are a type of financial assistance to help with college costs. They typically help students cover the cost of tuition, school supplies and books. Some may also cover living expenses. These loans are not based on an asset. Rather, they are simply promises made by the student to repay the funds at a later time.

There are several things that typically make federal student loans different. Federal loans typically offer a low interest rate. This may make them more affordable to students. The second benefit is that students typically do not have to repay the loans right away. Instead, they may pay for them after they complete school. This is called a grace period. Students likely do not begin to repay the loans until they discontinue or complete their education. The benefit is that they may be in a job and working at that point.

A student loan likely helps students to focus on their education. They may also allow those who would not otherwise have access to school to get those costs covered. There may be various types of student loans available. Many students should spend some time comparing their options carefully.

What Types of Students Loans Are Available?

Student loans typically range from federal direct loans to private student loans. Federal loans include three types: Direct subsidized, direct unsubsidized and PLUS loans. Loans may also be different based on who may obtain them. Some may be private loans. Some may be backed by the United States federal government. Some may be only available to those who have a demonstrated financial need.

Which one is perfect for you typically depends on multiple factors. Many federal government loans are the most affordable. These may offer low interest rates. They may also have fixed rates. That means the interest costs usually do not does not rise over time. They may be more predictable for borrowers. This likely makes these loans a better option for many. They tend to be a better option than commercial lenders as a result.

Commercial loan lenders may still be a viable option. They tend to offer competitively low interest rates. They are typically often readily available to borrowers. Students typically do not have to have a very impressive credit score to obtain them. They may be also versatile enough to cover many costs. However, these loans may be a bit different. They do require full underwriting process. That means the bank has to have some credit history. Often, just not having a bad credit history is worthwhile.

Some commercial loans typically require borrowers to have a cosigner for the loan application. That happens if the student does not have any income. It may also occur if the student has no credit score. Loan terms may vary widely. Some lenders may be much more lenient in these areas than others.

Here are some types of student loans to consider. Each is a bit different but all are worth taking a closer look at for college students. First, consider available federal student loans.

Direct Subsidized Loans

This type of federal student loan is typically available to students who have financial need. The interest rates are lowest. It is only available to those who may prove they need the funds, though.

Direct Unsubsidized Loans

These federal student loans typically do not require any demonstrated financial need. They are also not based on a student’s credit score. Students may apply on their own. No cosigner is needed. Schools determine how much a student may borrow in this type of program. This is based on other financial aid provided. It also is based on the cost of attendance.

Direct PLUS Loans

This type of loan is based on a student’s credit score. They are unsubsidized loans. They are typically meant for parents. They may also be used by grad students and professional students. The parent version is called a Parent PLUS loan.

The Direct Loan program for federal loans is also known as a Stafford Loan. These are typically available to both undergraduate and graduate students. The funds come from the U.S. government. As noted, there are two types. Let’s break these down a bit more.

Subsidized Stafford Loans

Subsidized Stafford loans typically have a set interest rate. They do not require students to make any payments during their education period. The governments pays the interest on these loans for students while they are in school. Subsidized Stafford loans may be the perfect option because of these factors.

Unsubsidized Stafford Loans

Another option is an unsubsidized Stafford Loan. The interest rate is comparable to that of a subsidized loan. The difference is that the federal government typically does not pay for the interest costs. Payments are deferred until after the student graduates.

Direct Consolidation Loans

It may also be important to discuss other types of loans. A direct consolidation loan is an option that some students may need down the road. It may be common for students to receive loans from more than one borrower each semester or year. That means some students may end up with 8 to 10 student loan payments to make each month after graduation. A direct consolidation loan may help.

Direct consolidation loans generally allow students to consolidate all of their loans into just one loan. That means they  may make one payment to one lender. This makes loans easier to maintain. Students should typically use this option down the road. It is often used after students graduate.

There is no fee for students to consolidate their loans. There may be flexible options available. Students may have a fixed interest on the loan. Students may only use this option one time. Consolidation may make the loans more affordable to pay. The monthly payment may be lower in these loans than the individual payments made otherwise. Sometimes, students may also be able to extend the time they need to repay the loans as well.

The direct benefit to these loans is having one payment. This may reduce the risk of making late payments or having fees added for a missed payment. It is also important to know that this could extend the loan terms loan. That may mean you end up paying your student loans for a much longer period of time. Many loans may not offer any type of prepayment fee. That may mean  you could pay more and pay them off early. Another key to note is that some may limit your eligibility for a loan forgiveness program. If interest rate discounts become available, that may also be limited.

PLUS Loans

As noted, PLUS loans are typically available in two forms. One is for parents. The other is for graduate students. Parent PLUS loans are meant for undergraduate students considered dependents. These loans are also funded by the U.S. federal government. They usually do not have a maximum amount on them. That means you may use them to cover many of your educational costs. They may also be used to cover costs not covered by other forms of financial aid.

PLUS loans have a fixed interest rate. The rate is typically higher than what you would pay for Direct Loans. It may still be more affordable than many private loans. Many students use these as a secondary option beyond what is provided by Direct Loans

What Types of Private Student Loans are Available?

Private student loans may be available to students or parents. These are nonfederal loans from lenders such as credit union, bank or Sallie Mae. Private loans may help students get funds for college. Private loans for college students may require a cosigner. They may also be known as alternative education loans. They may be ideal for students who may not qualify for other loan programs but need help paying for school.

These loans have a significantly higher interest rate. They may also have eligibility requirements. This includes things like credit scores and income. Some loans may also have variable interest rates. That means the interest rate may change over the lifetime of the loan. Many students may qualify for these loans. That includes students with a bad credit score. These loans are not made through the U.S. government. As a result, some typically require students to make payments while they are in school. It is best to compare them carefully before choosing one.

How Much Money Could I Borrow?

Many factors play a role in this decision. Many loans have limits. The maximum amount available for student loans depends on if they are a private or a federal loan. It also matters based on what year you are in school. Undergraduate students may borrow up to $12,500 each year through federal loans. This is a total of $57,500. Graduate students may borrow more. This is $20,500 each year of their graduate students. Grad federal loans are capped at $138,500.

It is very important to consider your decision to borrow carefully. Even though it is possible to borrow this much, it may not be beneficial. Keep education costs affordable by borrowing only way you need to. Also, note that the amount a student may borrow also depends on their need and the loan type. Students need to start with the Free Application for Federal Student Aid or FAFSA.

According to the Federal Student Aid, dependent undergraduates students may borrow in the following manner as of 2020:

  • 1st year students may borrow $5,500 in loans overall. That includes up to $3,500 in subsidized loans.
  • 2nd year students may borrow $6,500 overall. Up to $4,500 may be in subsidized loans.
  • 3rd and further years, students may borrow $7,500 overall. Of that, $5,500 may be subsidized.

This equals a total of $31,000 overall for undergraduate students. That includes up to $23,000 in subsidized funds.

Independent undergraduate students may borrow much more. In these situations, the student is found to be fully responsible for his or her education. There is no parent responsibility. Student loans are typically different for these students.

  • 1st year students may borrow up to $9,500 overall. Loan amount is up to $3,500 that may be subsidized.
  • 2nd year students may borrow up to $10,500 overall. Subsidized loan amount is up to $4,500.
  • 3rd and further years, students may borrow $12,500 overall. Of that, $5,500 loan amount may be subsidized.

This allows for borrowing up to $57,500 overall for these students. Of that $23,000 may be subsidized.

There may be other requirements for students who are grad students. This also applies to professional students. There is an annual limit of $20,500 allowable. A total of $138,500 is allowable overall. This includes undergrad loans.

Private student limits are not as set. The lender sets these limits. They are not set by the government or the school. They may vary significantly between available lenders. Many of the time, students may not  borrow more than the total cost of attendance. Many lenders require proof of this as well. Be sure to check with the lender to determine these loan limits.

How to Apply for Federal Student Loans?

To apply for student loans, students typically need to fill out the FAFSA. This determines how much federal financial aid you may receive for the academic year. This includes undergraduate loans and graduate loans.

It also allows you to learn what type of loans you qualify for from the federal government. It gathers information about your family income, assets, and taxes. Take the time to complete it accurately and completely. You may use FAFSA to apply for direct subsidized loans. It is also used to apply for unsubsidized student loans. 

To apply for federal loans, you typically need to provide a great deal of your personal information. This may include:

  • Your social security number
  • Your parent’s social security number
  • Your driver’s license number and expiration date if you have one
  • Non citizens need to apply with their alien registration number
  • Copies of your federal tax return
  • Copies of your parent’s federal tax return
  • Demonstration of any other income received. This may include veterans benefits, child support, or others
  • Information about assets you own. This includes saving and checking account information. It also includes investments. Any real estate in your ownership must be reported.

Parents and grad students may also use this form to apply for Direct PLUS loans for Parents. Grad students may use it for Direct PLUS loans for grad students. Approval and access to these loans is established after an award letter is sent from the school.

Many students should start here. Form there, they may apply to private student loans if they need to do so. Fill out the FAFSA. Then, wait for the school to provide an award letter. It outlines all of the details on subsidized and unsubsidized loan options. It may also provide information on the types of federal student loans you qualify for through the Department of Education. Students typically need to complete the FAFSA annually for each school year. These loans come to you through the U.S. Department of Education. 

How to Apply for Private Student Loans?

Many students may need to apply for private student loans as well. This application process is different. Every lender sets their own rules and steps for this. The first step is to find available lenders. Sometimes private lenders require a credit check. 

You may use a student loan finder tool to be matched with the right loan programs for you. This may be the easiest way to apply for loans for higher education. Once students find lenders, they may need to complete the application for that lender. This information includes most of the same information required on the federal student loan applications. Be accurate and thorough with this information.

Students may need to provide more information as well. This includes data the lender uses to determine how much they may lend. It also includes information on the student’s needs. You may need to provide the lender with information such as this:

  • The amount of money you wish to borrow
  • The university or college you are enrolled in or plan to attend
  • The student’s level of study
  • Where the student lives (your permanent residence)
  • Any cosigner information you want them to have

You typically do not have to apply with a cosigner. You may be able to apply without one. Then, if you want to see more qualification options, you may add a cosigner later. Some lenders may run an application with and without a cosigner.

Lender applications may differ significantly between lenders. However, many are asking the same information. Students may elect to apply to more than one private lender. This may be a good option if you want to compare options available to you. Many student loan lenders also allow you to complete an online application. That makes it a bit easier and faster to obtain a loan.

Many students may need to provide the lender with access to their credit score. You may just need to consent to have the lender pull your credit report. This is done through a signed or agreed upon box. You may need to also do this for a cosigner if you have one. Many students may find they are more likely to gain approval with a cosigner than without one. It may offer better interest rates as well.

Do your due diligence when applying for a student loan like this. You typically need to read through all of the documentation that is provided to you. You may also need to ensure all information you provide is accurate. Otherwise, your loan application may be denied right away.

Then, read the terms associated with having a cosigner. Some lenders allow the cosigner to be released from their obligation to pay the loan in some cases. This may be, for example, in situations where student borrower makes a certain number of payments on time. The student may also have to meet a specific income requirement at this time to qualify for this.

It is a good idea to look at all of the terms associated with the loan as well. That includes information about the monthly payment requirement and repayment options. Look at what the interest rate is. Also, consider if it is a fixed interest rate or a variable interest rate. Variable rates tend to be a bit more expensive. You may also want to consider if the lender may charge any fees for the application or other needs you have.

The lender may provide you with all information. The financial institution may then provide a credit decision quickly. After this, they may set up origination and fund the loan. The more information you have, the better you apply for to pay for school. Also, know that the school's financial aid office may help you with any decision you have to make.

Why Should I Apply for a Student Loan?

Student loans may offer students numerous benefits. These loans may be easily accessible to many students. They could be larger loan options. Other types of funding may be very hard for students to receive. Federal student loans are more affordable than private loans. They typically have lower interest rates. They may also be some of the best options for students without a proven credit history. Federal aid also offer various repayment plans and deferment or forbearance. 

For many students who need to pay for school, this is a good route to take. The most affordable option for paying for school is to pay costs right away without a loan. For those that may do this, it tends to be the best route to take. There is likely no interest applicable then. Yet that is not a realistic option for many students. That is why federal loans work so well.