How to Get a Student Loan When Financial Aid Isn’t Enough

Written by Christy Rakoczy

February 28, 2018February 28, 2018Paying for CollegeFeatured, Student Loans750Christy Rakoczy

Updated on February 28, 2018

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In an ideal world, financial aid you don’t have to repay would fund your college education. Unfortunately, most students can’t get enough grants and scholarships to cover all their tuition. If you max out on free sources of financial aid, you’ll need to figure out how to get a student loan to pay the remaining costs of your education.

How to get a student loan

So what can you do when grants, scholarships, money from savings, and working doesn’t cover the full cost of your education? At this point, you’ll need to explore your options for federal student loans and private student loans. Here’s how to do it.

Federal student loans

It’s always a good idea to max out federal student loan options before you consider private loans. This is because federal loans come with a variety of unique benefits, including:

Student loan interest rates set by the government
Subsidized interest for eligible loans in deferment
A grace period before repayment begins after graduating or dropping below full-time status
Access to income-driven repayment plans
Clear criteria for deferment and forbearance
Eligibility for student loan forgiveness if you work in a qualifying public interest position

Fortunately, figuring out how to get a student loan from the federal government is easy.

The process starts with filling out the FAFSA. The FAFSA should be completed as soon as possible when it becomes available on Oct. 1 each year, as many sources of financial aid are limited. Our ultimate guide to filling out the FAFSA can help you complete this online form.

Completing the FAFSA is necessary not only to qualify for federal loans but also to become eligible for many sources of free financial aid, such as need-based Pell Grants. You have to fill out the FAFSA every year to receive financial aid. The forms should be completed in the year before you need aid to pay tuition.

When you complete your FAFSA, you’ll list the schools you’re interested in attending. Information from your FAFSA will be sent to those schools. Each school will put together a financial aid package that shows how much in federal student loans you qualify to borrow.

However, it’s important to note that just because you qualify for a certain amount of federal loans doesn’t mean you have to borrow the full amount. The less debt you take on while in school, the less you’ll have to pay back when you graduate. Your school will tell you how to accept all or part of your financial aid package.

Undergraduates can take out between $5,500 and $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans.

Private Student Loans

Private loans work a little bit differently from federal loans. So it’s important to figure out how to get student loans from private lenders. When considering private loans versus federal loans, remember that with private loans:

Interest rates are determined by your creditworthiness.
Interest generally begins accruing as soon as your loan is disbursed.
Repayment terms and benefits are determined by the lender or servicer, rather than by the federal government.

Borrowing limits also differ with private student loan lenders. Rather than having annual and aggregate limits to how much you can borrow, private loans typically let you borrow up to 100% of the cost of attendance minus financial aid. If your cost of attendance exceeds the maximum amount of federal student loans you’re able to borrow, private loans can help fill that gap.

Also unlike federal student loans, you don’t qualify for private loans through the FAFSA. Instead, you apply to the bank, credit union, or another lender. Because terms, conditions, interest rates, and other factors can vary depending on the lender, it’s important to do your due diligence and research private lenders to make sure you’re getting the best deal possible.

Again, while it might be tempting to take out the maximum amount you’re approved to borrow, you should explore all other options for funding your education before relying on student loans, particularly private student loans. This is because private loans don’t offer the generous repayment benefits that federal student loans do.

As far as timing goes, you should fill out the FAFSA as soon as you are able. Then, wait to apply for private student loans until you have received your complete financial aid package from your institution. That way, you know you’re only borrowing as much as you absolutely need.

Honey Smith contributed to this article.

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