How to Apply for College Loans: A Beginner’s Guide

 March 23, 2021
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If you or your child is getting ready to attend college, there’s a good chance you’ll need to take out college loans. Student loan debt statistics show that about 70% of students graduating from four-year colleges have debt, so you aren’t alone if you need to borrow to cover educational costs.

Unfortunately, deciding how much to borrow, what type of loans to take out and where to get them, as well as understanding different student loan requirements, can be challenging. You don’t have to figure how to apply for college loans on your own, though.

This comprehensive guide can show you how to apply for both federal and private student loans so you can get the financing you need by following these steps:

1. Understand your options
2. Gather your information
3. Complete the FAFSA
4. Review your student aid report
5. Fill out a CSS Profile
6. Review your financial aid award letter
7. Determine if you’ll need to apply for private loans
8. Learn how to apply for private student loans
9. Borrow only as much in college loans as you need

1. Understand your options

Before you begin the process of applying for college loans, it’s a good idea to understand your options, which include:

  • Federal loans for students
  • Federal loans for parents
  • Private loans for students
  • Private loans for parents

For many students, federal loans are the first and best option.

“Federal student loans, such as the Federal Stafford Loan, are available to college students without any parental involvement,” student loan expert Mark Kantrowitz said. They’re offered through the Department of Education, which provides more than $120 billion annually in loans, grants and work-study funds.

Federal loans have significant benefits compared to private loans. This chart from the Consumer Financial Protection Bureau (CFPB) shows why federal loans typically are the best choice for students who need to apply for a student loan:

Image: CFPB

When applying for federal loans, you’ll usually want to take out as many subsidized loans as you can before taking out unsubsidized loans.

“Subsidized direct loans are federal loans where the federal government will pay the interest while the student is a full-time student in those programs,” said Fred Amrein, founder of PayForEd, a data solutions company. Your interest on subsidized loans may also be covered during your grace period and postgraduate deferments.

Both parents and students can apply for federal student loans:

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  • Undergraduate students could be eligible for direct subsidized loans and direct unsubsidized loans, also called Stafford loans. (Perkins loans used to provide another option for students with exceptional financial need, but the Federal Perkins Loan Program has expired.)
  • Parents could be eligible for direct PLUS loans if their children are undergraduates.
  • Graduate and professional degree students could be eligible for direct unsubsidized loans and direct PLUS loans.

It’s important to understand student loan requirements and limits for all loan types. For example, there are limits on the amount you can borrow, as this chart shows:

Dependent Undergraduate Student Dependent Undergraduate Student with a Parent PLUS Loan Denial Independent Undergraduate Student Graduate or Professional Degree Student
First Year (0-29 credits) $5,500. A maximum of $3,500 may be subsidized. $9,500. A maximum of $3,500 may be subsidized. $9,500. A maximum of $3,500 may be subsidized. $20,500
Second Year (29.1-59 credits) $6,500. A maximum of $4,500 may be subsidized. $10,500. A maximum of $4,500 may be subsidized. $10,500. A maximum of $4,500 may be subsidized. $20,500
Third, Fourth and Fifth Years (59.1+ credits) $7,500. A maximum of $5,500 may be subsidized. $12,500. A maximum of $5,500 may be subsidized. $12,500. A maximum of $5,500 may be subsidized. $20,500
Aggregate Maximum Loan Amount $31,000. A maximum of $23,000 may be subsidized. $57,500. A maximum of $23,000 may be subsidized. $57,500. A maximum of $23,000 may be subsidized. $138,500. The graduate debt limit includes direct loans received for undergraduate study.

If you’ve exhausted your options for federal student loans, private loans can provide additional funding.

Both parents and students can borrow private student loans. However, Kantrowitz explained that a creditworthy cosigner usually is required for students taking out private loans because they might not have the income or credit history to qualify on their own.

2. Gather your information

Whether you’re applying for federal or private loans, you’ll need to have some basic information available to apply for a student loan. You’ll need:

  • Tax returns for the parents — and for the student, if the student files taxes — from the two years prior to the academic year the loan is for (the IRS Data Retrieval Tool might be able to fill in your tax and income information for you)
  • Adjusted gross incomes for the parents and the student from the two years prior to the academic year the loan is for
  • Information about assets, including businesses and investments owned by the parents or student
  • Information about untaxed income, such as income from retirement savings plans or child support
  • Social Security numbers and dates of birth for the parents and the student
  • A list of schools the student is applying for
  • Grants or scholarships the student has received

Documentation such as bank statements also might be required. It’s often easiest to gather this information and keep it all in one place since you’ll need it when you complete loan applications.

3. Complete the FAFSA

The FAFSA is one of the key forms you’ll fill out when you’re applying for college loans.

“Filling in the Free Application for Federal Student Aid is a prerequisite for access to federal student loans,” Kantrowitz said.

As the name implies, you can complete the FAFSA for free, but you must complete it by the deadline. This chart provides information about FAFSA deadlines, which depend on when you’ll be attending school:

Academic year Deadline for submission Deadline for filing updates, corrections
2020-2021 June 30, 2021 Sept. 11, 2021
2021-2022 June 30, 2022 Sept. 10, 2022
Note: Check with your college and state about its unique filing deadlines.

It’s best to act early. Funds might be limited, and they could be exhausted if you wait.

You can complete the FAFSA online on the StudentAid.gov website or request a paper FAFSA by calling 800-433-3243.

By creating an account on the website, you can return to your application as needed. You’ll also benefit from faster processing of your application. If you complete the FAFSA online, it’ll be processed in three to five days — compared to seven to 10 days for the paper application.

If your parents won’t provide their information or help you fill out the FAFSA, you might be able to complete the form without them. This infographic can help you to determine whether you’ll be required to provide your parents’ information:

Image: Federal Student Aid

4. Review your student aid report

After you’ve filled out your FAFSA, you’ll receive a copy of your Student Aid Report (SAR), which summarizes your financial information and provides information about your Expected Family Contribution (EFC). If you identify any mistakes, log in to FAFSA to make corrections.

Here’s a sample of the report’s federal student loans section:

Image: Federal Student Aid

Your SAR will be sent to the colleges you listed when you completed the FAFSA, and they’ll use it to provide information on the financial aid you’re eligible for.

5. Fill out a CSS Profile

In addition to federal aid, institutional aid also might be available to you. It comes in the form of loans, scholarships and grants. Close to 250 colleges award institutional aid to students who apply through the College Board’s CSS Profile.

If you complete a CSS profile, you can find out about and apply for grants, scholarships and loans made available by different academic institutions you might be interested in attending. To apply, visit the CSS Profile website and create an account. Once you do, you’ll need to:

  • Select the schools you’re interested in
  • Provide information about your parents and yourself, including Social Security numbers, tax returns, W-2 forms, bank statements, investment statements and mortgage information

There’s a fee of $25 for one college report, and you’ll pay $16 for each additional report. The fees can be waived, however; if you’ve received an SAT fee waiver, you’ll get an automatic waiver for the CSS Profile, as long as you log in to the CSS Profile site with the same ID you used for the SAT.

The College Board has a step-by-step tutorial detailing how to complete the CSS profile.

6. Review your financial aid award letter

After you submit your FAFSA, the schools you applied to will send you a financial aid award letter. This letter might provide information on:

  • The total estimated cost of attendance, including tuition and fees, housing and meals, books and supplies and personal and miscellaneous expenses
  • Scholarships and grants you qualified for
  • Work-study opportunities
  • Subsidized and unsubsidized loans

Letters will vary from school to school. This sample letter shows you what type of information you can expect:

Image: Massachusetts Educational Financing Authority

If you want to accept the financial aid award, you’ll generally need to sign and return the letter. Most schools send letters by mail that you’ll need to mail back, but some have established secure online portals for the exchange of documents.

If you receive multiple financial aid letters, you can make objective comparisons using our awards comparison tool.

7. Determine if you’ll need to apply for private loans

You might find that the amount of financial aid you receive doesn’t cover the cost of the school you want to attend. If that’s the case, you’ll need to determine how to cover the difference. Your options could include:

  • Family contributions if parents or other family members are willing and able to pay
  • Summer job earnings
  • Savings
  • Scholarships or grants from community groups or other sources
  • Parent PLUS loans
  • Private student loans

8. Learn how to apply for private student loans

Both parents and students can apply for private student loans. However, there are different student loan requirements for private loans versus federal loans.

For example, private lenders have strict requirements for your credit score and debt-to-income ratio, which is calculated by dividing your monthly debt payments by your gross monthly income. Lenders use your debt-to-income ratio to determine if you can afford the amount you want to borrow.

Because there are many private student loan lenders, it’s a good idea to shop around. You should consider:

  • Loan eligibility requirements: What do you need to qualify?
  • Loan terms: How long do you have to repay the loan?
  • Repayment terms: When do you need to start repaying? Is there a prepayment penalty?
  • Fees: Is there a cost to apply for the loan or a loan origination fee?
  • Interest rates: Is the rate fixed or variable? How much will you pay to borrow?

You can visit our private student loan marketplace to find private student loan lenders offering loans to parents and students.

You’ll need much of the same information you needed when you filled out your FAFSA to apply for private college loans. While there isn’t a deadline to apply like there is with the FAFSA, you should apply as early as possible to ensure you have enough time to receive approval and funding.

You’ll also need to complete a Private Education Loan Applicant Self-Certification form for each private loan application you submit. This form details the cost of attendance and your existing financial aid.

When you complete your application, be prepared with information about the school you’re attending and the amount you want to borrow. Your financial aid award letter will help you determine how much money you need from a private loan.

It can take several weeks to get approved for private student loans. When you do get approved, the approval letter should specify the interest rate. Compare loan options from different private lenders to see which loans make the most sense for your situation.

Example: Estimated timetable for applications for College Ave
Days before school Steps to take
90 Estimate your financial need, find a cosigner
60 Shop around with several lenders to find the best overall loan for you, and get a cosigner commitment
30 Apply for your preferred student loan
10 Look out for confirmation that the funds are slated for arrival, wait for your first loan statement and (if applicable) prepare to make in-school loan payments

9. Borrow only as much in college loans as you need

Whether you’re interested in learning how to apply for federal loans or how to apply for private student loans, you’ll likely want to borrow the minimum you need to cover your educational costs. If you keep your loan balance as low as possible, it’ll be easier to repay your loans after you graduate so you can become debt-free faster.

Andrew Pentis contributed to this report.

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