If you plan to attend college, you might need to consider vying for a student loan application.
It’s no news that getting a college degree can be expensive, and you will need adequate funding.
Around 55% of individuals under 30 who pursued higher education took out student loans or other forms of debt to cover their expenses, as reported by the Federal Reserve.
Consequently, it’s essential to understand the available choices and the application process before considering a student loan. There are two types of student loans: federal and private.
Federal student loans come from the government through the Federal Direct Loan Program.
However, there are four kinds of federal student loans:
- Subsidized (for students with financial need, where the government pays some interest),
- Unsubsidized (for all students, but they pay interest),
- PLUS loans (for graduate students, professionals, and parents, with higher interest rates), and
- Consolidated loans (combining all federal loans into one).
On the other hand, Private student loans are from banks or credit unions.
This article aims to provide some fundamental information to assist you in applying for student loans.
Read Also: What Student Loan Should I Get
Student Loan Application: Federal Student Loans
You must complete a Federal Student Aid (FAFSA) form to apply for federal student loans.
This aid program is also used to apply for student grants and scholarship programs.
Once your school receives your FAFSA form, they will send you a financial aid offer.
This offer may include a federal loan and instructions on what to do next, like taking part in entrance counseling and officially agreeing to the loan.
And keep in mind you’ll need to reapply for federal student aid every year you’re in school.
Here is a simple step for a federal student loan application;
Step 1: Create an Account with FASA
To create a FAFSA account and log in, you must:
- Go to the official FAFSA website (fafsa.ed.gov) and click on “Create an FSA ID” button.
- Input your email address and create a unique username and password for your FSA ID.
- Fill in your personal information, including your full name, date of birth, Social Security Number, and contact details.
- Verify your email by following the link in your email inbox.
Once your FSA ID is created, you can use it immediately to sign and submit your first FAFSA form.
After these steps, you’ll have a valid FAFSA account with an FSA ID, which you can use to process your loan.
Step 2: Fill out the FAFSA Form
The deadline to submit the FAFSA form is usually around the end of June. However, applying early is essential because financial aid is sometimes given out on a first-come, first-served basis, so it’s better to be quick.
To successfully fill out the form, it’s best to gather the necessary information beforehand to make filling out the FAFSA form easier.
Here are some crucial items you’ll need:
1. Your FSA ID
Create an FSA ID as your username and password. It’s like a digital signature that allows you to complete and update the FAFSA form.
Parents of dependent students must also have their own FSA ID to complete the form.
2. Your Social Security Number (SSN)
This is on your Social Security card. Non-U.S. citizens eligible for federal student aid also need their Alien Registration number.
3. Your Driver’s License Number
If you have a driver’s license, enter it on the FAFSA form. But if you don’t have one, you can skip the step.
4. Your Federal Income Tax Return
Report your 2021 income on the form. You may be able to transfer this information from your 2021 tax return using the IRS Data Retrieval Tool.
5. Records of Untaxed Income
Report any untaxed income, such as child support or veterans’ noneducation benefits.
Ensure to find specific details for both your parents’ untaxed income and your untaxed income when filling out the form.
6. Records of Your Assets
Include the amounts in your savings, checking accounts, and investments (except your primary residence). Report the current amounts, not those from 2021.
7. List of Schools You’re Interested in Attending
Add the colleges you’re considering, even if you haven’t applied or been accepted yet.
You can add up to ten schools on the FAFSA form, and the information will be shared with the schools.
Eligibility Criteria for Federal Student Loans
To be eligible for federal student loans, you need to meet some essential criteria:
- Show that you have a financial need for the aid.
- Be a U.S. citizen or an eligible noncitizen.
- Have a valid Social Security number, except for students from specific countries.
- Enroll or be accepted as a qualifying degree or certificate program student.
- Be enrolled at least half-time to qualify for Direct Loan Program funds.
- Have satisfactory academic progress in college or career school.
- Sign a certification statement on the FAFSA form stating that you don’t have any issues with federal student loans or grants and use the aid for educational purposes only.
- Show that you are qualified to pursue education at a college or career school.
You can prove your qualification for education at a college or career school by:
- Having a high school diploma or a recognized equivalent like a GED certificate.
- Completing high school in a homeschool setting approved by the state, or if the state doesn’t require a completion credential for homeschooling, completing a homeschool program that meets the exemption from compulsory attendance requirements.
However, additional eligibility requirements may apply in specific situations, such as for non-U.S. citizens, students with criminal convictions, and students with intellectual disabilities.
Student Loan Application: Going For Private Student Loans
If you’ve reached the maximum amount you can borrow from federal student loans or are not eligible, consider applying for private student loans.
Private student loans come from private establishments such as banks, credit unions, and online lenders.
They don’t offer the same protections as federal loans, and the terms vary between lenders.
Each private lender has specific eligibility criteria and application processes for their student loans.
However, you might qualify for private loans with competitive interest rates if you have a good credit score and a solid credit history, like graduate students or parents.
It’s essential to understand some things before applying for private student loans:
1. Credit Requirements
Unlike federal student loans that don’t require a credit check, private lenders usually need to check your credit.
You’ll generally need a good-to-excellent credit score, usually around 650 or higher, and enough income to repay the loan.
2. Consider a Co-signer
As a college student, you might not have a credit history yet, making it harder to qualify for a loan. In such cases, you can apply with a co-signer.
A co-signer must be someone with good credit who agrees to be responsible for the loan if you miss payments.
Hence, having a co-signer will improve your chances of getting approved.
3. Compare Offers
Interest rates, repayment terms, and benefits vary among private lenders, so shopping around is essential.
Consider factors like whether the interest rates are fixed or variable, the repayment options, loan terms, hardship options, co-signer release possibility, discounts, and additional perks.
How Much Student Loan Can I Receive?
The amount of student loan you can get depends on whether you are an undergraduate student, your year in school, and whether you are a dependent or independent student.
The maximum you can borrow yearly in federal direct subsidized and unsubsidized loans is between $5,500 and $12,500.
Is It Possible for a Non-U.S. Citizen to Obtain a Student Loan?
Yes. Non-citizens must provide their alien registration and Social Security numbers during the application process.
Eligible non-citizens can use the FAFSA to apply for the same federal aid options as U.S. citizens.
Do U.S. Banks Give Loans to International Students?
Yes. However, international students need a co-signer who is a creditworthy U.S. citizen or permanent resident.
The co-signer must have a minimum annual income of $24,000 for the present and previous year and meet a specific minimum credit score requirement set by the bank.
Read Also: Student Loan Settlement
The application process for any student loan involves carefully considering which loan is best for you and understanding eligibility criteria and required documentation.
While federal student loans offer certain benefits and protections, private loans can be a viable alternative for those who have reached their federal borrowing limits or have unique financial situations.
Students and their families must plan, gather the necessary information, and compare loan offers from different lenders to make informed decisions.
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