Whether you are still considering your options or have already been accepted into a degree program, one thing you might be wondering about college is how you are going to pay for it. While some college students may qualify for grants, scholarships, and even work-study programs that can minimize the financial burden of paying for college, up to 70 percent of students with a bachelor degree end up with some accumulation of debt.
If you are considering student loans as a means of covering your education costs, understanding different types of student loans and how to apply for student loans is a must.
Discussing Student Loans
Before delving into the different types of loans available and debunking some common myths about student loans, it is important to understand exactly what this type of student aid entails.
What Are Student Loans?
In simplest terms, student loans are a form of financial aid that allows students to borrow money, either from the federal government or a third-party lender, to pay for qualifying educational expenses. Common expenses that may be covered by student loans include tuition, fees, and housing.
If you are wondering how to apply for student loans, it is important to understand that this form of aid needs to be paid back. Borrowers may also be required to pay back interest on their student loans.
Types of Student Loans: Federal vs. Private
Student loans are offered both through the federal government and through private lenders. Most private lenders in the student loan space are banks, credit unions, and similar financial institutions.
If you are wondering how to apply for federal loans, it is important to know that federal student loans can be subsidized or unsubsidized. With a subsidized loan, you do not accumulate any interest on your loan until after you have graduated or stopped going to school. Unsubsidized loans, on the other hand, begin accruing interest as soon as you receive the funds. Most private loans are unsubsidized, which is why many students pursue subsidized federal loans before exploring other borrowing options.
Debunking Myths Surrounding Financial Aid
Before you start exploring your student loan options, there are a couple of myths worth debunking that may help you make a better-informed borrowing decision.
Myth 1: Only Students With Good Grades Get Loans
Unlike grants and scholarships, which are sometimes awarded based on merit, many college students can take out student loans to help pay for college. While different lenders may have different borrowing requirements, including credit score and age requirements, grades are typically not a consideration for this type of financial aid.
Myth 2: Private Loans Are Always More Expensive
While it is true that federal loans often have lower interest rates, or may even be subsidized, the reality is that private loans are not always more expensive. The key is to shop around and pay close attention not just to interest rates, but repayment terms and other details as well.
Preparing to Apply for Student Loans
Now that you have a better understanding of the types of student loans available, you may be wondering how to apply for federal loans and private loans.
Documents and Information You Need
First, be sure to gather any documentation or other information you may need to complete and submit your application. Specific application materials can vary from one lender to the next, but most will require such details as bank account information, Social Security number, and driver’s license number. In some cases, you may also need to submit previous years’ tax returns or other information.
Deciding How Much You Need to Borrow
Before you apply for student loans, it is also a good idea to determine how much you need to borrow. This can be done by calculating the cost of your schooling and subtracting any other forms of financial aid, such as grants or scholarships, that you may be receiving.
From there, you can also subtract any amounts that you will be paying out-of-pocket. The remainder is how much you will need to borrow.
Step-by-Step Guide to Applying for Student Loans
Ready to start applying for student loans? Here is a practical step-by-step guide to show you every step of the way on how to apply for student loans:
Step 1: Fill Out the FAFSA
The best way to determine your eligibility for federal student aid, including grants and scholarships, is to complete the Free Application for Federal Student Aid (FAFSA). Upon completion of this form each academic year, you can also accept any federal loans for which you may be eligible.
Step 2: Research and Apply for Scholarships
In addition to completing your FAFSA each year, it is a good idea to explore scholarship options as another means of paying for school. Scholarships can be both need-based and merit-based, and because they do not need to be paid back, they can be an excellent option for many students. Check out free resources, such as FastWeb, to match with scholarships based on your unique criteria.
Step 3: Evaluate Federal Loan Options
Take time to consider your federal student loan options, which may include:
- Direct subsidized loans
- Direct unsubsidized loans
- Parent PLUS loans, which allow parents to cosign on a loan for a potentially lower interest rate
Keep in mind that different loan types may max out at a certain amount, so it is not uncommon for students to take out more than one type of federal loan to pay for school.
Step 4: Explore Private Student Loans
If you need additional funding to pay for school or if you simply want to explore options beyond federal loans, be sure to shop around for private loans as well. This is especially true if you have already established good credit, as a better credit score could help you qualify for a lower interest rate.
Step 5: Choose the Best Offer and Accept
Once you have taken the time to explore your options and scrutinize such essential things as interest rates, repayment terms, and repayment options, you can determine which loan(s) may be right for you. Once you formally accept a loan offer, you can usually choose to have the funds directly deposited into your bank account or receive a check for the total loan amount.
Managing Your Student Loans Post-Acceptance
Even after you have accepted student loans, there are some critical things to keep in mind when it comes to managing your loans while you are in school.
Keeping Track of Loan Disbursement
Keep in mind that some loans may automatically disburse at different times. Rather than receiving a lump sum to pay for the entire school year, for example, you might receive a disbursement each term. Be sure that you understand your loan disbursement schedule, what to expect, and what it might mean for your interest accrual.
Understanding Your Repayment Schedule
Make sure, too, that you understand when you will be expected to start paying back each of your loans. Typically, you do not need to start paying on your loans within six months after you have graduated or left school, but this can vary from one lender to the next. Making timely repayments is crucial to avoiding penalties, fines, and accumulating interest.
Take time to understand your repayment options, too. For example, federal loans may offer a wide range of repayment plans to suit your needs. This can include income-based repayment plans and even student loan deferrals for those who qualify.
Tips for a Smooth Student Loan Application Process
As you prepare to apply for student loans, there are a couple of best practices you can follow to make the process go a little more smoothly.
Start Early to Meet Deadlines
First, do not wait until the last minute to start applying for student loans. Most loan applications will require extensive personal information, financial information, and documentation, so you will want to give yourself plenty of time to gather everything you need. The earlier you get started with your student loan applications, the less stressful you can make the process for yourself.
Stay Organized and Keep Copies of All Submissions
If you are applying for multiple loans, it is also important to stay as organized as possible and to keep copies of everything you have submitted to each lender. This way, if you need to follow up with a lender or if you have questions about your application, you will be able to easily find everything that you need.
Learn More About Financial Aid and Student Loans
With different loan types, interest rates, and repayment terms, there is a lot to take into consideration when borrowing money for school. Understanding how to apply for student loans and how to apply for federal loans is crucial. By knowing what to look for in a student loan and how to plan accordingly for repayment, you can navigate this complicated process with more confidence.
Looking for additional guidance on student loans? Post University is here to help. Learn more about different types of student loans and explore other resources on financial literacy and responsible borrowing today.
Thank you for reading! The views and information provided in this post do not reflect Post University programs and/or outcomes directly. If you are interested in learning more about our programs, you can find a complete list of our programs on our website or reach out directly!
Please note jobs and/or career outcomes highlighted in this blog do not reflect jobs or career outcomes expected from any Post program. To learn more about Post’s programs and their outcomes, please fill out a form to speak with an admissions advisor.