How to Apply for Student Loans: Step by Step Guide

Posted by

If your parents are struggling financially or their salary is not enough to send you through college until graduation, then it is wise for you to how to Apply for Student Loans. Although, many can survive these days by doing some high paid jobs while they also take classes. This then creates avenue for them to get student loans which they can pay back when due. However, this post will guide you on how to apply for a Student loan online.

Quick Tips

  • We have private lenders who can help you loans but the best guaranteed loan for you as a student is the Federal loans. This is because Federal student loans are backed by the federal government and you may get forgiveness after some years. Plus, Federal loans have a number of advantages over student loans from banks and other private lenders. This is because they have relatively low and comes with a fixed interest rates (private loans often have variable rates) and offer a several methods of easy repayment plans.
  • Federal loans for students, college, and even parents.
  •  To apply for federal loans, you will have to fill out Free Application for Federal Student Aid (FAFSA).  
  • We have two major types of Federal student loans – subsidized and unsubsidized
  • Other loan types include federal PLUS loans for parents and private loans from banks and other lenders.

Step 1: Fill Out FAFSA form

Filling out your FAFSA form is the first step to applying for student loans in the United States. FAFSA which means Free Application for Federal Student Aid is a government loan application form for student and parent who are not financially buoyant. FAFSA form is available in more 30 states across the United States as a means to come to aid of students who cannot afford to for their college through graduation. To fill out the FAFSA form, you will asked to provide several information which include student’s and parents’ source of income and what you do as investments, as well as other important matters which relates to the number of children the family has in the college at the same time. The question will focus on asking you if the family will have more than one child in college at the same time. 

Once you supply this information, FAFSA will use the information to calculate or determine the amount of money the government assumes will be enough for you to pay for college for the coming school year. This is known as Expected Family Contribution.  

To fill out your FAFSA form, it is advisable you gather all your account information in order to save time. Once you do this, you can now complete the FAFSA online by visiting the FAFSA Student Aid website or visiting the financial aid office of your school to fill out the form or make use of the myStudentAid mobile app downloaded from Google play store or iOS app store to fill out the form.  

Step 2: Compare Your Financial Aid Offers

When you apply for FAFSA using the financial aid offices at your college, the financial aid office will use the information you supplied to them from your FAFSA to calculate the amount of money you will get. This is calculated by deducting your Expected Family Contribution (EFC) from your Cost of Attendance (COA). The Cost of Attendance includes your mandatory fees, room and board fees, tuition fees, and other expenses. This cost of attendance is available on most college’s website.

In order to make a clear difference between COA and EFC, most colleges will combine an aid package which may include paid work-study, federal Pell Grants and loans together. In many instances except in rare conditions, do not have to pay back grants unlike loans.

It is however important for you to compare your financial aid offers when you receive the award letter. The award letter is the notification each college give you on how much aid it is offering around the same time that you receive your official acceptance. In addition to federal aid, colleges may make money available out of their own funds, such as merit or athletic scholarships. Although these award letters for student loans or grants vary depending on different schools. This will help you know the amount of money each college offers and the type of loans they offer. For the loan type, it could be direct subsidized or unsubsidized.

Direct Subsidized Loans: this type of loan is meant for students with the lowest expected family contributions (EFC) at the college. Example of this loan type are grants, this loans are issued to students with exceptional financial need. The benefit of this direct subsidized loan is that it is backed up by the U.S. Department of Education. In other words, the U.S. Department of Education will pay the interest on your behalf while you are still in school and after you graduate for the first six months.

Direct Unsubsidized Loans: this type of loan is meant for families regardless of need, and the interest will start increasing immediately. During the COVID-19 economic crisis in 2020, payment and interest on these loans was suspended.  

Step 3: Try Private Student Loans

Apart from federal student loans, you can also give a private student loan a try. In other words, you can also borrow money by applying for a private loan from local banks, credit union, insurance companies and other financial institutions.

Applying for private loans will save you the stress of going through the long process and questioning of FAFSA. Plus, private loans are made available to you irrespective of your need. However, you will be made to fill the financial institution’s form will in most cases which requires a simple process. To get approved of private loan, you will need a good credit score or a co-signer with one. The co-signer can be any of your relatives, parents or friends to endorse the loan.

Unlike student loans, where you might need a good credit to qualify for a loan, but private loan lenders will check your credit history and income. In other words, less-than-stellar credit is not a requirement for college students to qualify for a loan even if you have no credit at all or poor credit, you can still qualify. One interesting thing about private lenders is that you are even likely to get a student loan with bad credit.

But on the contrary, one of the downsides of private loans is that it comes with higher interest rates when compared to federal loans. Private loans’ interest rates are usually variable instead of being fixed. This means you are likely to get an accrued interest rate that can lead to higher amount owed. Private loans do not have easy and flexible repayment plans and you can’t consolidate your debt under the Federal Direct Consolidation Program unlike federal loans. But you can get a refinance for your private loans at a lower interest rate after you graduate.     

Step 4: Compare Your School

Another factor you need to put into consideration is when you borrow a student loan is the amount of money it will cost you to attend a college. It is therefore wise for you to compare and choose the best college where you can afford to pay back your debt. This is to avoid unnecessary stress and burden which are likely to hold you back in school even after graduation. In some cases, debts like this can be as a limiting factor in the future as they are likely to act against your career and life choices. Another factor you can also put into consideration is choosing a profitable career good enough to repay your loans during college and after graduation.

Frequently Asked Questions about Student Loans

What Benefits Does Federal Loans have over Private?

Federal loans come with low interest rate while interest rates at private loans are variables. You can get a flexible repayment plans on Federal loans while you can’t for private loans. For private loans, you can qualify for a loan with a less-than-stellar credit rating while federal loan may require you to have a good credit score to prove your creditworthiness. Private loans usually have higher borrowing limits than federal loans, plus federal loans are based on financial need.

What are the differences between direct subsidized and unsubsidized loans?

Direct subsidized loans are made available for students with exceptional financial need. While direct unsubsidized loans are loans made available to families irrespective of need, and the interest will start accruing immediately.

How Can I borrow college money under federal loan programs?

The first step to borrow money under federal loan program is to apply and fill out the Free Application for Federal Student Aid, aka FAFSA. Borrowers will be asked some questions while filling out the form which they must provide answer to the questions especially about the student’s and parents’ income and investments, as well as other important matters which relates to the number of children the family has in the college at the same time. The question will focus on asking you if the family will have more than one child in college at the same time. Once you supply this information, FAFSA will use the information to calculate or determine the amount of money the government believes will be enough for you to pay for college for the coming school year. This is known as Expected Family Contribution which is now being rebranded as the Student Aid Index.

Final Verdict

Student loans are of the best resources you can apply for to pay for families and college bills. On the contrary, Private and federal loans have their benefits and downsides depending on the circumstances. Some Private loans issued by banks and credit unions, are much like any other kind of loan meaning a credit check will be required. Federal loans are often based on exceptional financial need with lower interest rates and comes with a flexible repayment plan.