If you’re planning to attend college, a student loan can help you cover the costs. But applying for loans is a complex process.
The process begins by filling out the Free Application for Federal Student Aid (FAFSA). It’s important to submit this application as early as possible to get the best financial aid award.
1. Fill out the FAFSA
The Free Application for Federal Student Aid, or FAFSA, is the key to accessing federal grants, loans and work-study opportunities. Filling out the FAFSA is a critical part of the financial aid process because it gives you access to more than $120 billion in student aid each year.
Your FAFSA will include your family’s personal demographic information and financial information. This includes your income, your parents’ income and assets, and your bank accounts. The information you provide on your FAFSA is used by the federal government and your college to determine your financial need.
In addition, your FAFSA will include your Expected Family Contribution (EFC). Your EFC is a number that helps the schools you’ve applied to determine your financial need and award you need-based aid.
If you have a prior tax return, the FAFSA will use your income data from that prior year to help calculate your EFC. The Federal Tax Information Tool is a good way to get this information pre-filled into the form.
Using this tool will save you time and make the process easier. However, it does require that you submit your tax returns electronically or by mail before completing the FAFSA.
Once you’ve filled out your FAFSA, your school will send you a Student Aid Report (SAR), which lists your expected family contribution and other financial information. Your SAR is also the basis for the aid offers you receive from your school.
The school you apply to will subtract your expected family contribution from your cost of attendance (COA) to determine your financial need and award you need-based financial aid. Then, your school will send you a financial aid award letter.
2. Get an award letter
Getting a financial aid award letter is an important step to finding out how much you can afford to pay for college. These letters, which are sent to all students who have submitted a FAFSA and met other eligibility requirements, include the school’s cost of attendance (COA), any grants, scholarships, work-study opportunities and student loans that are available to you.
Your school’s COA will give you an estimate of what you can expect to spend on tuition and fees, room and board, books, supplies, transportation and other expenses for the entire academic year. Your award letter will also tell you how much financial assistance the school is offering you based on your EFC, or Expected Family Contribution.
Awards vary from one institution to the next. Typically, schools send out financial aid award letters about 1 – 3 months after you submit your FAFSA and meet their other eligibility requirements.
Once you receive your award letter, it is important to read it carefully. The terms and formats of award letters can be confusing, and they can change from year to year.
For instance, some colleges have opted to send financial aid award letters electronically via their online portal and student account. Others mail the letter to the student’s home address or a PO Box.
The most important number to consider when reading a financial aid award letter is the total cost of attendance. This amount will not appear on your award letter, but will be shown when you calculate your cost of attendance.
Some schools offer a “Financial Aid Shopping Sheet” in their online portal or student account that can help you determine what you can afford. In addition, some schools will automatically send you a notification in your email when they send their award letter, so make sure to check that for confirmation.
3. Apply for federal loans
When you apply for a student loan, you will need to fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is a form that calculates your Expected Family Contribution, or EFC, which is the amount of money the government believes you should be able to borrow to pay for college.
The EFC is determined by a number of factors, including your family’s income and assets, whether you are a full- or part-time student, and whether you have any other financial aid (like loans from private sources). Once you complete the FAFSA and get an award letter, you can start applying for federal loans.
Federal loans have lower interest rates than those of most private student loans, and they also offer a range of flexible repayment plans and access to loan forgiveness programs. It’s important to explore all your options before making a final decision, however.
Once you’ve figured out which type of loan is best for you, you’ll need to gather essential information and prepare your documents. The exact forms you need will vary based on the lender, but preparing in advance can help you get through the process quickly and easily.
For example, you’ll need to provide personal information such as your name and address, valid identification, recent pay stubs or W-2 forms and self-employment verification. You may also need to provide recent tax returns and bank and savings account statements.
You’ll need to include your parents’ income and assets if you are applying as a dependent, and you’ll likely need to add a cosigner if you don’t have sufficient credit. A cosigner is a parent or a friend with good credit who agrees to take responsibility for the loan if you fail to make your payments.
4. Apply for private loans
Applying for a student loan is an important step to financing your education. These loans are offered by private banks, credit unions and online lenders. They usually have lower interest rates and fewer protections than federal loans, but they can be an affordable option for some students.
Before applying for a private student loan, consider your borrowing needs and eligibility requirements. These include age, income and credit score minimums. You may also need a co-signer.
A co-signer helps you qualify for a private student loan, and they can provide some extra support during repayment. However, they take on a lot of risk if you default or aren’t able to make payments.
Adding a co-signer can increase your chances of approval, but it’s still essential to check with the lender ahead of time to determine their eligibility criteria.
Qualification requirements for private student loans vary from lender to lender, so it’s best to read the fine print carefully. Generally, you’ll need to be enrolled full-time in an eligible educational program, meet credit requirements and have sufficient income.
Loan terms for private loans range from five to 20 years. Shorter terms have higher monthly payments but lower interest rates and lower total costs.
Repayment options for private loans can include interest-only, fixed or deferred payments while you’re in school. After graduation, you can choose to start repaying your loan immediately or wait until the end of a grace period.
To find the right private student loan, compare your options with a free tool like ELMSelect. It’s an industry-leading, transparent and lender-neutral resource that allows you to see all of the student loan offers available for a specific school. You can then select the best match for your financial needs and budget.
5. Contact your school’s financial aid office
Getting a student loan is one of the most common ways to finance your education. These loans are available through both federal and private lenders, and you can use them to pay for college costs, such as tuition, books, and room and board.
If you want to get a student loan, the first step is to fill out the FAFSA and submit it to the government and your school. The government and your school will then look at your financial need to determine which aid programs you qualify for, such as grants, scholarships, work-study, and student loans.
Once you have your financial aid offers, you can decide which ones to accept or decline. You can also review your awards and contact your school’s financial aid office if you have any questions about the offer or what it means for your budget.
Before you sign a loan contract, it’s important to understand the terms of your loan, including interest rates and repayment plans. If you don’t, you could end up paying more than you need to, which could affect your finances for years to come.
Your school’s financial aid office can help you compare your options and choose the best loan for you. This can include comparing the fees charged by different lenders and the length of time it takes to repay the loan.
Keep in mind that each loan inquiry on your credit report can negatively impact your credit score, so shop around and compare the fees, interest rates and other factors before you sign.
After you’ve submitted your FAFSA, your school’s financial aid office will send you an award letter that tells you how much you’re eligible to receive in federal and/or private loans. Make sure you read the award letter carefully, and let your school know what loans you want to accept or decline before the deadline listed on the award letter.