Paying for college is a challenge for many prospective students. Grant and scholarship dollars only stretch so far, so borrowing money may be the only way to afford higher education. More than half of students who went to college in the 2019-20 school year took out student loans, according to the Federal Reserve.
If you go this route, you have two main types of loans to choose from: private and federal. Because federal student loans come with generous borrower protections and no credit check, it’s best to apply for these first. Private student loans may be more costly but generally have higher loan limits. If you want to borrow money for school, you’ll first need to know how to apply for student loans.
How to get a federal student loan
To unlock federal student loans and federal student aid, you’ll first need to fill out the Free Application for Federal Student Aid (FAFSA) form. It’s free and comes out in October each year. Fill it out the year before you plan to attend school and reapply with a new FAFSA form each school year.
When you get your results, you’ll find out whether you qualify for subsidized or unsubsidized federal student loans. Subsidized loans are for undergraduate students with financial need. If you qualify, the Department of Education will pay your interest costs while you attend school and during deferment. You pay all interest costs with an unsubsidized loan.
Here’s what to expect in the application process:
Set up an account. Students will need to create a Federal Student Aid (FSA) account to complete the FAFSA.
Gather your documents. Get a sneak peek of the FAFSA on the worksheet provided by the FSA. Compile a list of schools that should receive your FAFSA form and gather your Social Security number, driver’s license number, federal tax return, proof of income (usually with W-2 forms) and current bank statements. If you’re listed as a dependent, you’ll have to collect these materials from your parents, as well.
Fill out the forms. The FAFSA takes about 30 minutes to complete.
Review your SAR. After you submit the FAFSA, the Department of Education will send you a student aid report (SAR), which shows you a summary of all the information you’ve entered. Review the SAR for accuracy.
Receive your financial aid offers. The colleges you listed on the FAFSA will calculate your financial aid and send you a financial aid letter, which may include a mix of loans, grants and work-study options.
Accept the financial aid. Your financial aid offer may vary with each school. Once you’ve compared offers and chosen a school, contact the school to accept the financial aid. If it includes federal student loans, the school will tell you how to accept them.
The CSS Profile
Although the FAFSA is your only pathway to federal student aid, a lesser-known form allows you to apply for nonfederal scholarships and other kinds of aid directly from the school. The College Scholarship Service (CSS) Profile is available in October each year. But unlike the FAFSA, there’s a small cost involved: an upfront $25 fee and an additional $16 fee for each school you include on the form.
You may qualify for aid beyond your federal options, so consider this option if your school participates. To fill out the application, first register with the College Board. It’s a little more in-depth than the FAFSA — it takes about two hours to complete — so check out what kind of documents you need. After submitting the form, you can visit your CSS Profile dashboard periodically to check on your application, add more colleges and upload any additional documents.
How to apply for a private student loan
If you’ve hit your federal student loan borrowing limit or you don’t qualify for financial aid, you may need to cover some school costs with a private student loan. These come from banks, credit unions and online financial institutions.
Here’s how to get student loans from a private lender:
Shop around with multiple lenders. Compare loan amounts, interest rates, fees and repayment plans. Because you’ll likely have a relationship with this lender for several years, be sure it offers hardship options in case you run into financial trouble later on. The lender should also have good reviews and responsive customer service.
Check your eligibility. Before filling out an application, get a feel for whether your credit history and income meet the lender’s qualifications. Some lenders can do a prequalification check, which allows you to see if you qualify and what potential rates you’ll receive — without hurting your credit. If you don’t meet requirements, you’ll need a co-signer who can.
Complete the application. You may need to agree to a credit check and provide details such as your school, cost of attendance, type of degree, citizenship information, Social Security number, proof of income and debt obligations.
Wait for verification. The lender will confirm your cost of attendance with your school, which may take a few weeks. Once your school certifies the school, the lender typically releases the funds directly to the school.
Considerations before you borrow
Because student loans are a years-long commitment, it’s important to set aside some time to make a long-term plan. Here are a few things to consider before you apply for a loan.
Private loans come with caveats
Although private student loans can be a great option when you don’t qualify for enough federal aid, you should understand the downsides. They aren’t eligible for some of the borrower protections that come with federal student loans, such as loan forgiveness and income-based payment plans. Deferment and forbearance options can also vary by lender. And if the loan comes with a variable interest rate, it can increase anytime during repayment.
Borrow only what you need
Borrowing the minimum amount you need to pay for school helps keep your monthly payments lower after you graduate. Most schools help you estimate the cost of tuition, fees, and room and board each year. Once you know how much you need, subtract any funds you expect to get from scholarships and grants. If you need to borrow money to cover the rest, start with federal student loans and move to private loan options if necessary.
What will your monthly payments be?
Before applying for loans, crunch the numbers to understand what you’re getting yourself into. Use a student loan calculator to figure out what your monthly payments will be after graduation and whether you’re comfortable with the amount. Also check how long it will take to pay off the debt and how much interest you’ll pay over the life of the loan.
Can you pay for school in other ways?
Student loans, whether federal or private, have to be repaid at some point. But grants and scholarships don’t have to be repaid in most cases, as long as you meet requirements. Some colleges, universities and career schools offer their own financial aid, so ask about your options. You can also take a part-time job during school to help defray the costs of tuition or rent. There are many ways to pay for college; take a look at all of your options before committing to a loan.
The bottom line
While it’s a good idea to first exhaust your grant and scholarship options, knowing how to get a student loan is an important part of planning for college. Start by filling out the FAFSA to see how much federal aid you can get, then look for more options through the CSS Profile. If you need to borrow more money, then look for private student loans that offer affordable payment terms. The work you put into your student loan applications now can help you keep your school costs low — so you can focus on school and your post-college career.
Featured image by Tatiana Frank of Shutterstock.
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