Although they might have once been considered a last resort, student loans have now become almost a prerequisite for going to college. These days, it’s becoming rare to find someone who doesn’t need financial aid to pay tuition.
The data speaks for itself. In the 2016-2017 academic year, the average full-time undergraduate received $14,400 in financial aid, according to College Board’s Trends in Student Aid report. And Experian’s State of Student Loan Debt in 2017 report found that student loan borrowers carry an average of 3.7 loans each.
In short, if you think you need student loans to attend college, you’re not alone. But what you know before you apply can change everything. Here’s your ultimate guide on how to apply for a student loan.
5 steps to follow to apply for a student loan
The best thing to do to apply for student loans is to get going as soon as you can. Federal student loans of on a first-come, first-served basis, so you’ll have the most access to financial aid the earlier you apply.
What’s more, the first time applying could be a bit overwhelming, so the more you can get ahead of the game, the easier the whole process will be to handle.
1. Compile all the financial information you’ll need to apply for a student loan
To obtain federal student aid, you’ll have to fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA. As the name implies, the form is free and puts you in the running for financial aid for college, including federal student loans — making the whole application process easier, even if the form itself takes some time to fill out.
The FAFSA comes out in October each year, and you’ll need to apply the year before you’re planning on attending school — and then reapply each year until the year before you graduate.
Since there’s a lot of information on the form, it might be ideal to start compiling what you need in September. That way you’ll have everything you need to apply the day the application comes out.
Here’s a list of some of the financial information you’ll need from your parents — besides your info — to get ready for the FAFSA:
- Your parents’ adjusted gross income for the two years prior to the academic year you’ll attend school.
- Your parents’ tax returns from that same period.
- If you file taxes, your tax returns from that same period.
- Your parents’ Social Security numbers and dates of birth, as well as your own.
- Whether or not your family receives Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Free or Reduced Price School Lunch, Temporary Assistance for Needy Families (TANF), or Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
- Any untaxed income, such as child support, payments to tax-deferred pensions and retirement savings plans, and so on.
- Assets and net worth of business or investments they or you might have.
- A list of up to 10 schools you’re applying for.
- Any grants or scholarships you’ve already received.
Think you shouldn’t have to use your parents’ information on the FAFSA? Even if your parents don’t intend to help you pay for college or you live on your own, you might still be required to include them. Use this infographic to find out for sure.
Finally, if you want to see for yourself which questions might be asked on the FAFSA, here’s a worksheet provided by Federal Student Aid to help. Additionally, you can also use this guide to completing the FAFSA.
2. Use these forms to apply for student loans and free aid
As you can probably already see, the FAFSA is your only path to getting federal student loans. If you don’t fill out your FAFSA, you can’t get federal student aid for college.
However, there’s a lesser-known form that might be of use to you. It’s called the CSS Profile, and it helps you obtain institutional aid from specific colleges. You can fill this out to see if some of the colleges on your wish list offer aid to supplement what you get from the federal government.
What’s more, the CSS Profile also unlocks access to grants, not just loans. That means you might be able to take out even fewer loans for college, reducing the amount of debt you have to pay back.
But the CSS Profile isn’t free. There’s an initial $25 fee, plus an additional $16 for every school you add to the list (although there are also fee waivers for those who might qualify.) The questions on the profile are similar to those on the FAFSA, but the CSS Profile might go into more depth in some places.
An advantage of the CSS Profile is that colleges you thought were out of your reach financially could suddenly become a real option if you qualify for their aid. In that case, the small fee for the application might be worth it in the end.
3. Fill out the FAFSA and CSS Profile online
When it comes time to fill out your FAFSA and — if you so choose — your CSS Profile, it might be easiest to do it electronically.
You or your parents can register for access to the FAFSA through fafsa.gov. After you’ve registered, the entire FAFSA can be filled out online and even be edited later if necessary.
While you’re at it, you can skip some of the steps above by using the IRS Data Retrieval Tool to autofill much of the necessary financial information. However, it can’t hurt to gather the paperwork in advance anyway, just in case you run into issues using this tool.
And if you choose to fill out the CSS Profile, you can do so via the College Board. To make sure your desired colleges are included, review this list before you pay to fill out an application. For even more help, you can watch this tutorial before you fill out the CSS Profile to be sure you have everything you’ll need.
4. Review your Student Aid Report
After you fill out your FAFSA, you’ll receive what’s called a Student Aid Report, showing you a summary of all the information you’ve entered. It can take from three days to three weeks to get this report. It’s important to review it for accuracy as soon as possible and edit your FAFSA if necessary.
Remember, aid is first-come, first-served — don’t delay on fixing any errors that might exist on your FAFSA.
There might also be times when the school you included on your FAFSA selects you for verification. If that happens, you might simply need to prove extra documentation to confirm what you entered on your FAFSA. According to Federal Student Aid, this isn’t something to worry about — some schools might do this randomly, while others require it for everyone.
The most important thing is to provide whatever documentation you’re being asked for on time, as missing the deadline could mean not getting any federal financial aid.
5. Wait for your financial aid award letter
After completing your FAFSA, you’ll receive a financial aid award letter from the colleges you listed on the form. The timing on these letters can vary from college to college. However, if you’ve already received admissions acceptance from a college but no financial aid award letter, you can call their financial aid office to inquire about the letter’s status.
Your financial aid award letter will tell you everything you need to know regarding what you qualify for. If you qualify for grants or a work-study opportunity, for example, that information will be there. If you only received an offer for student loans, then you didn’t qualify for free aid.
Although each college formats award letters in their own way, here’s a sample to give you an idea of what to expect:
Among the loans offered to you, you might see a mixture of subsidized and unsubsidized loans. Subsidized loans don’t accrue interest while you’re in school, so it’s best to use those first. Here’s a chart to help you understand the order you should follow in accepting any aid you might qualify for:
Remember that you don’t have to take all the aid offered to you. Scholarships and grants don’t have to be repaid, but student loans do. Only take what you need, even if accepting more aid can give you a nicer lifestyle.
After all, considering the years it will take to repay the loans and all the interest that will accrue on them, you might find that the nicer lifestyle in college wasn’t worth it. Cover your tuition, room and board, and books. Then use part-time work for other living expenses if you want to keep your student loan debt as low as possible.
And if you received award letters from more than one school, you can use this tool from FinAid to compare them.
Once you know what school you’re going to and how much you want to accept in federal aid, including grants and loans, you’ll simply need to sign a promissory note for any loans you’re accepting. You might receive this in the form of paperwork to sign or be directed to Studentloans.gov to sign online.
How to evaluate private student loans when federal student loans aren’t enough
Unfortunately, there may be times when federal student loans come up short. Expected family contribution plays a big role in how much you’ll be approved for — whether or not your family can or will help you pay for your tuition.
If you need to fill the gap, private student loans can be an option (although you should very carefully consider the pros and cons before you act). Here’s what you need to know about this type of student loan.
1. How to apply for student loans from private lenders
Private student loans come from lenders outside of the government. You can apply for student loans directly through those lenders the same way you’d apply for many other types of loans. As a first step, check out our guide to how some of the top private student loan lenders stack up.
When you apply, there’s a good chance you’ll need a co-signer. That’s because, at your age, you probably haven’t had an opportunity to build credit or a solid income yet, two factors that determine your chances of approval for a loan.
You might seek out a parent or family member to become your co-signer, but know what you’re getting them into as well. If you default on your loan at any time in the future — even a few months away from total repayment — the loan will become their responsibility.
In other words, if you think the loan is too much for you ever to repay, don’t take it with a co-signer either.
2. How to compare offers
Let’s say you and a co-signer have applied for a few different private student loans to see which one gives you the best offer. What should you consider before choosing? Are interest rates the most important thing?
Currently, interest rates for private student loans range anywhere from just under 3% all the way to over 9%. That’s a wide range, but rates aren’t the only thing that matter. Here are a few other things to keep in mind:
- Which lender offers you enough to fill your tuition gap?
- Does the lender with the best offer also have benefits such as deferment or forbearance (which allow you to delay repayment)?
- What do reviews of the lender have to say?
- Finally, which lender offers you the lowest interest rate?
As much as this decision seems easy — choose the one with the best rate and loan amount, right? — don’t jump into your decision. This is a lender you’ll likely have a relationship with for one or two decades. Be sure they have good reviews, options to help if you hit some financial bumps in the road, and responsive customer service.
3. Caveats to be aware of with private student loans
Private student loans can seem like a miracle tool when federal student loans come up short, but they’re not without risks. Here are a few issues to be aware of before you take on a private loan.
- Private student loans aren’t eligible for federal student loan forgiveness.
- Private student loans don’t come with income-driven repayment plans.
- Some private student loans have deferment or forbearance as an option, but this can vary by lender.
- If you take on a private student loan with a variable interest rate, that rate can jump up at any time — remember you might be paying for 10 to 20 years, so that’s a definite risk.
- Private student loans aren’t regulated by the government the way federal student loans are, which can mean fewer protections for the borrower.
- Taking on a co-signer for a private student loan puts your co-signer’s finances at risk if you should ever pay late or default.
While these factors by no means have to be deal breakers, it’s crucial that you understand them before you choose to use private student loans. These are real financial products with real financial consequences (a fact that is also true of your federal student loans) — choose wisely.
Before you sign on the dotted line, see what you can get for free
There’s one important question to ask yourself before you apply for a student loan and accept one (or more): Have you done all you can to achieve free money for college?
Filling out your FAFSA is a great start to seeing what kind of federal scholarships, grants, and work-study programs you can qualify for, not just student loans. But don’t stop there. Here are a few more ways to get free money for college:
- Apply for grants. You might find some specifically suited to your own situation, such as where you live or the subject you want to study.
- Look for scholarships. You don’t have to be a star student to get a scholarship. You can find them based on activities you do, things you’re interested in, and even your heritage.
- Search for colleges with the best financial aid. Some colleges pride themselves on being able to offer aid to students in need. Give them a try, even if you think they won’t be able to help you.
When it comes time to apply for a student loan, it’s easy to feel overwhelmed by the whole process. But simple things like gathering your financial information, getting your FAFSA in early, and applying for free money for college can go a long way.
And as you go through the process, keep this guide handy to revisit along the way.
Rebecca Safier contributed to this article.
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|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7% variable Annual Percentage Rate (“APR”): 96 monthly payments of $179.28 while in the repayment period, for a total amount of payments of $17,211.20. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 5/29/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
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5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
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* Offer valid for new Custom Choice Loans for which applications are submitted for a credit decision between 12:00:00am EST on June 1, 2019 and 11:59:59pm EST on August 31, 2019. A 0.50% interest rate reduction will be included in the loan options presented to an applicant during the online application process, upon passing the initial credit review. The interest rate reduction will be applied as of the first disbursement date and will be effective for the life of the loan.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
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Citizens Bank Disclosures
|3.99% – 11.98%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 11.99%4||Undergraduate and Graduate|
|3.27% – 10.80%5||Undergraduate and Graduate|
|4.46% – 9.43%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|3.99% – 11.64%8||Undergraduate, Graduate, and Parents|