You will probably need a student loan to pay for college. Most people simply don’t have enough cash on hand to pay for 4-5 years of college. If you’re not sure how to get one there is no need to worry. This article will show you how to apply for both a federal student loan and a private student loan.
Understanding the Federal and Private Student Loan
There are two types of loans – Federal Loans and private loans. Most people will take out federal loans to pay for college. Federal loans are not based on your credit score. Subsequently, they are based on financial need, which means you’ll get money for college if your family falls below a certain income level. Private loans are also an option. These loans are based on your credit score, but they are not based on financial need. This means that you’ll get a loan even if your family income is too high.
Limits and Amounts
It’s always a wise idea to take out only the amount of money you need to pay for your college expenses. This minimizes the amount of debt you’ll have to pay back later.
Federal loans limit the amount of money you can borrow each year.
1st Year Undergraduate: $5,500
2nd Year Undergraduate: $6,500
3rd Year and Beyond: $7,500
The total aggregate limit undergraduate students can borrow is $57,500. There are different limits for independent students and graduate students. For more information about this, you can go to the official U.S. Department of Education website.
Private loans work differently. Private loans will fund the cost of attendance for the school you are attending. Subsequently, this is advantageous for students that attend more expensive schools where the total cost of their undergraduate education goes beyond $57,500.
What Types of a Student Loan Are There?
- Federal Student Loans
Federal loans include the following:
– Stafford Loans which include Subsidized and Unsubsidized loans
– PLUS loans
– Perkins loans
- Private Loans
There are many lenders that specialize in private loans for school. Each lender has their own lending criteria, interest rates, and repayment options. You can use a number of internet sites dedicated to comparing these types of loans.
How to Apply for Federal Loans
Applying for federal loans requires you to fill out the Free Application for Federal Student Aid or FAFSA. This is the only application you will need to fill out and it can be used by any school for which you are applying for attendance. However, filling out the FAFSA is a lengthy process that requires many forms to fill out.
Here is an idea what you will need to do to fill out the FAFSA.
– Apply Online
Apply online at www.fafsa.ed.gov. When you first apply you will need a Federal Student Aid (FSA) ID number. This information will stay with you permanently throughout your college career and is used to also electronically sign your application. The process could take a few days to create and register so plan ahead of time.
Get ready to pull out the most recent copies of your filed tax return. The information from these returns will be used to fill out parts of the FAFSA, which is necessary for determining which type of student aid you will be eligible for.
– Other Information
Be prepared to submit other information such as your social security number, your bank account statements, and other records of earned income.
Once the FAFSA is filled out any school that you plan to attend will use this information to determine how much aid you can receive, the types of loans you are eligible for and if you qualify for any type of free federal aid in the form of grants and scholarships. For more information on filling out the FAFSA go to the official Free Application for Federal Student Aid website.
How to Apply for Private Loans
Private student loans will need to be filled out on an individual basis. But there are a number of internet sites, such as Credible, where you can fill out one application and match with multiple lenders. You can compare rates, lending terms and repayment options in one convenient place. Once you choose a lender, you will need to access their website to complete the application process.
There are a number of lenders that are widely used and are popular choices for private student aid. Some of these include:
These are just a few of many so be sure to shop around for loans designed to fit your needs.
How Does Repayment Work?
Repaying Federal Loans
The standard repayment plan for the federal Stafford loans is 10 years. You will usually have a grace period of 6 months after graduation before repayment begins. Your monthly payment will be calculated based on your final loan balance, the interest rate and a repayment term of 120 months.
However, if you cannot make the monthly payment, you will still have a number of repayment options which include the Income Sensitive Repayment Plan. You may also be able to extend your repayment up to 25 years. However, these options have their own eligibility requirements.
Repaying Private Loans
Many private lenders will also have repayment plans that can extend from 10-20 years or more. Each lender will have different repayment requirements. Some require repayment or payment of the interest while you are still in school. Others will give you a six-month grace period after graduation. You will need to check with your particular lender to determine your repayment terms.
FAQ We Know You Have
How many applications do I need to fill out to get a student loan?
If you are applying for a federal student loan, then you will only need to fill out a FASA. All public colleges and universities will use information from the FASA to determine the aid you qualify for.
Which type of loan is better to take out, federal loans or private loans?
Federal loans are generally the better option. Your interest rates and repayment terms are better. You may also qualify for loan forgiveness programs with federal loans. Also, you should consider a private loan if your family income is too high or if you’ve reached aggregate limits from federal loans. You can also shop around for the best interest rates and terms.
Do I have to fill out a separate loan application for every private loan I may want?
Yes and no. There are a number of websites, such as Credible, where you can fill out one application and get a number of approvals and offers from private lenders. But you will have to finish up and sign your application for a specific lender on an individual basis.
Taking out a student loan is a necessary part of the college experience for most people. Subsequently, remember that you have two basic choices. You can take out a federal loan by first filling out a FAFSA. Otherwise, you can apply for a private loan on an individual basis with each lender. If you have your own experiences, thoughts or questions about the student loan application process please feel free to share them with others.