How To Apply For Student Loans For College

Wondering how to apply for student loans for college? With tuition costs quickly rising, we don’t blame you. After all, securing financial aid in the form of subsidized loans, federal loans, or help from federal student aid programs can often help you better offset education and housing expenses.

Here’s a closer look at how student loans work, how to apply for federal or private student loans and what to be aware of when it comes to interest rates, monthly payments and repayment schedules.

Investing in your education can land you a better salary and more options for financial freedom. Federal student loans can help get you started on your journey to a better career. They serve as one of the most popular ways to borrow money that can be used to pay for educational expenses.

Many of these programs, which are utilized by millions of college-bound students annually, make it possible to secure low interest rates and flexible repayment plans. That’s before you factor into account helpful government programs like scholarships and grants that offer those who qualify free money toward learning expenses.

These government-backed student loans are overseen and administered by the U.S. Department of Education (which serves as the lender). The federal student loan program is called the William D. Ford Federal Direct Loan Program, or Direct Loan Program for short.

Your repayment terms and the amount of money that you’ll be able to draw from these loans may be impacted by different factors. Your credit profile, your income, whether you’re considered a dependent and other forms of financial information all play into what you qualify for. Keep in mind that there’s a cap on the total amount you can borrow with federal student loans in a year.

Know What Type of Loan to Apply For

If you’re considering applying for federal education assistance, it’s important to know the difference between the types of loans; for example, subsidized versus unsubsidized.

A subsidized student loans is one option available for undergrads in need of financial assistance. To obtain one, applicants must prove they need financial help covering the costs of higher education. The school that you apply for will indicate how much money you can borrow in total.

One of the big benefits of subsidized loans is that those who get one won’t need to pay interest if they’re in school at least half-time, or for the first 6 months after they graduate.

Unsubsidized student loans can be obtained by eligible undergraduate, graduate or professional students in cases where applications are not based on financial need. As before, the total amount that you can borrow will be determined by your chosen institute of higher education.

Unlike with subsidized loans, borrowers with an unsubsidized loan must start paying interest as soon as the loan is paid out. That means interest will accrue even while you’re attending school or during grace periods. Be sure to factor this into your budget.

If you’re a parent of a student, you can apply for a PLUS (Parent Loan for Undergraduate Students) loan if your expenses cannot be covered by other types of financial aid. On the bright side, PLUS loans aren’t based on financial need. Nonetheless, to apply for one, borrowers will need to go through a credit check. Additional requirements may be applied if the applicant isn’t deemed creditworthy.

Do Your Research and Prepare Necessary Documents

Thinking of applying for a federal student loan? The first thing that you’ll want to do is review the FAFSA (Free Application for Student Aid) form.

The FAFSA form – which all federal student loan program applicants must submit – won’t just determine your overall eligibility for federal student loans, it may also help you qualify for federal student aid like work-study programs and grants. In addition to applying for FAFSA initially, you’ll need to fill the form out for every year that you’re enrolled in college to continue to receive federal student aid or loans.

Of course, if you’re hoping to benefit from federal education loan programs, you’ll have to qualify for one first. Bearing this in mind, the FAFSA can be quite comprehensive and complicated. Likewise, it will require you to submit a considerable amount of information.

It’s a good idea to take time upfront to do a good bit of research and gather all relevant documents that must be submitted before you apply for a student loan. Know that the FAFSA will ask for personal information such as your name and date of birth, plus extensive details about your financial situation.

There are several documents you’ll need to compile, including federal tax returns ,records of untaxed income and information on your parents’ financial assets if you’re a dependent. Details asked for here may also include balances in financial accounts, any investment holdings and other assets.

Apply Through The FAFSA

Before you apply for FAFSA, check your timing. The FAFSA deadline is set to June 30 of every year. You’ll need to apply beforehand if you want to obtain potential student loan funding for the fall semester of the current school year. After the deadline date, students will no longer be eligible to submit their application.

The FAFSA opens on October 1 for the following school year. So for 2022-2023, the FAFSA opened on October 1, 2021. Student aid is awarded on a first-come, first-served basis, so you’ll want to submit your application as soon as possible. Waiting to the last minute brings the risk of you missing out on thousands of dollars in federal loans, grants and/or scholarships.

The U.S. Department of Education further recommends filling out the FAFSA form online to save time and effort, especially when it comes to speeding up the process of sending your information to multiple schools. As part of the application process, you’ll need to list at least one school to receive your information. Then you'll need to determine your dependency status and input your parents' information. Afterward, you'll add all other relevant financial information. 

After completing the form, you can submit your application through the FAFSA website or app. You’ll then wait for the school’s financial aid office to send you a letter indicating what, if any, federal student loan programs that you may qualify for.

Afterward, you’ll have 3 days to review your information and fix any mistakes present in the form. In some cases, you’ll need to submit documentation for verification purposes, so provide any requested details or documents in timely fashion prior to deadline.

Students can also apply for private student loans, which are available as an alternative to federal student loans. Typically, reasons to apply for a private loan would include an applicant’s inability to qualify for a government-based loan program or having maxed out on the total amount of federal loans that they can borrow.

Terms of private student loans are often dictated by lenders though, and no two private student loan options are created equal. Keeping this in mind, you’ll want to do your homework and compare the upsides and downsides of each loan type or offer when doing your research.

Know How They Differ From Federal Loans

Be advised that federal student loan offerings typically provide considerably more flexibility than private student loan options. With the exception of PLUS loans, borrowers don’t necessarily need to pass a credit check to be considered for a federal loan, which could make them easier to qualify for.

Likewise, if you receive a subsidized loan, you won’t need to pay interest while you’re in school, during the grace period or deferment. Another key perk is that interest rates on federal student loans are fixed, meaning that they’ll remain the same throughout the lifetime of your loan.

The single biggest upside you may recognize with a federal student loan pertains to its repayment plan. Overall, federal loans offer borrowers more options when it comes to paying off their loans. Repayment plan options are offered based on your current income. So, if you can’t afford your current payments, you can apply for deferment or forbearance, which allows you to temporarily stop making payments.

The federal government also offers loan forgiveness programs to those who qualify – potentially saving borrowers thousands in student loan payments. Under the terms of the Public Service Loan Forgiveness (PSLF) program, eligible borrowers are those who have made 120 consecutive qualifying payments while working full-time for a qualifying employer under a qualifying repayment plan. Qualifying employers include government organizations and certain not-for-profit organizations.

On the flip side, private loans offer some benefits that federal student loans don’t. Perhaps the most prominent is that there’s no cap on private loans, which makes it possible to borrow more money for tuition, housing, books and other common educational expenses.

You may find the opportunity to take out a larger loan helpful, depending on your school and situation. Similarly, private student loan options may come in handy as an option for those who’ve already explored options for federal student loans, grants and scholarships.

Interest rates for private student loans can also be fixed or variable. This means that you’ll enjoy the option to pick between more predictable monthly payments or opt for variable payment opportunities which may come with lower interest rates attached. Private student loan borrowers can also access repayment plan options such as making fixed or interest-only payments while still enrolled in school, which can help lower overall loan costs.

Repayment plans for private student loans aren’t generally as flexible as those offered by federal student loans, however. For example: You cannot receive an income-driven repayment plan under the lending terms of a private student loan, nor will you be able to ask a private lender to have these loans forgiven.

As private student loans are based on your credit financial situation, you could be subject to higher interest rates if your credit isn’t ideal. In fact, if your credit score is on the lower side, you may need to ask a co-signer (such as parents or other loved ones) to co-sign onto the loan to qualify.

Shop Around For Lenders

Don’t simply accept any private student loan offer that is made to you outright. It’s important to shop around for lenders and consider the many types of loans and terms available to you.

On the upside, private student lending is a competitive business – meaning you may enjoy a variety of lenders to pick from. Generally, you’ll want to research and consider options from 3 – 5 lenders.

Your goal is to review different student loan providers to find a lender that offers the rates and terms that best suit your household needs. Consider asking the financial aid office at your college for a list of potential options or read third-party reviews online as you’re thinking about how to apply.

As you go about reviewing different private student loan options, consider these variables:

• Interest rates
• Fees
• Repayment options
• Loan terms and conditions
• Customer service
• Responsiveness
• Flexibility
• Loan deferment/forbearance

Gather The Paperwork And Apply

When applying for a private student loan, often less paperwork is required than when applying under FAFSA. Private loan application requirements will differ from lender to lender, but you’ll typically need to provide personal details such as your college of choice, address and Social Security number. Keep financial documents, such as your federal tax returns, W-2 forms, and financial account handy before applying as well.

Once you proceed with the full application, the lender will conduct a hard inquiry, which could affect your credit score. After that, it’s simply a matter of waiting to see how much you’ve been approved for and then signing your loan documents.

The following tips will help you decide how much money in student loans you should apply for.

Calculate How Much Your Monthly Repayment Would Be

Calculating your monthly repayment amount is the first step to getting a better idea on what fits in your budget. While student loans can help you pay for your college education, you don’t need to borrow the full amount that’s offered.

As you put together your budget, factor in tuition and living expenses. Also consider how much money you can afford to part with each month, and how much you’ll want to keep on hand for unexpected expenses.

It’s important to not take on too much debt and worsen your debt-to-income ratio (DTI ratio). Lenders often look to your DTI to determine if you’re eligible for an auto or home loan. So, a high DTI can limit your ability to borrow in other areas.

Know Your Needs And Compromise On Your Wants

Prospective students can create a college budget and get an idea of how much they can save every month. It’s important to do so, as the amount of money that you need to get by in college can be considerably different from affording optional perks that you might want.

For instance, you might want to live in a fully furnished on-campus apartment by yourself but living off-campus and taking on a roommate might help cut monthly costs considerably. As you think about how much you’ll want to borrow in student loans, ask yourself: Can I get by without any given individual expense?

You may be surprised how much you can save. The point is to be discerning about what you need vs. what’s nice to have and try to budget accordingly. After all, frugal shoppers will find that there are plenty of ways to save money in college, or at least spend less.

Look Into Grants And Scholarships.

Prospective students should also apply for as many scholarships as they’re eligible for. Doing so may provide you with free money to help offset tuition, housing and living expenses. To find grants and scholarships, resources you might turn to include:

• Your school’s financial aid office
• Federal agencies and offices
• State or national scholarship search tools
• State or national grant agencies
• Charities and non-profits
• Foundations, civic groups, and religious, ethnicity-based, or community organizations
• Professional associations and industry organizations
• You or your parents’ employers

Discovering how to apply for student loans doesn’t have to be a difficult or time-consuming process. But it does require you to do some upfront budgeting, planning and research, and you’ll have to compile necessary documentation and information.

Federal student loan programs offer opportunities in the form of flexible repayment plans and lower interest rates if you qualify. Alternately, private student loans can be a helpful stand-in if you don’t qualify for federal loans or need to go above the federal loan cap.

Whichever student loan program you pick, avoid overborrowing and apply for as many grants and scholarships as you can. By doing so, you can ensure that you’re getting started on the right foot after graduating and minimize the burden of student loan payments down the road.

Considering applying for a student loan today? Don’t forget to plan ahead and think about setting up a repayment plan as well. When it comes to your education, it’s never too soon to get a head start on financial planning.