Are you thinking of how you're going to finance your college education? Like millions of other American students, loans are a way to pay for tuition and living expenses while in school.
By applying for a student loan, you will be able to pay for your studies + other expenses now and pay off the loan later. All you need is the right application form and certain documents.
With your documents and qualifications, you can opt for either a federal or private loan. Whichever one works best depends on your circumstances.
To learn more about applying for a student loan, keep reading!
Federal vs. Private Loans
As a loan applicant, you can opt for one of two types of student loans. You can choose a federal loan or a private loan. So what is the difference?
Federal Student Loans
A federal loan is issued by the US government. Federal student loans are either subsidized or unsubsidized. Public funds provide much of the funding for these loans. For this reason, approval can be faster and easier for most applicants. The benefits of a federal loan may trump those of private loans.
A federal loan does not require you to have a previous credit score or history. On paper, you can apply fresh after graduating high school! Also, in light of recent developments, federally issued loans of any kind can be deferred and are subject to forbearance or forgiveness.
Private Student Loans
Private loans do the same thing as federal student loans. They pay for your college education now, and you can pay them back later. That aside, the following distinguishes them from federally funded loans.
First, companies or private financial institutions like banks lend the student loans. So, you can expect some differences in the qualifications, requirements, and eligibility criteria.
Second, private student loans do not receive the same level of consumer protection. In other words, you may have a harder time these days applying for forbearance or deferment.
Lastly, unlike federal loans, private student loans will require a credit or tax history. Without these, getting approval can be challenging for fresh high school graduates.
Which Should You Apply For?
You may apply for either or both.
Be that as it may, chances are high that:
- You are a high school graduate
- You do not have a credit history
- You have not paid any taxes
If this is the case, the obvious choice is to apply for a federal loan. If you believe you would be better off with a private loan, you can apply for one of those as well. Once again, just be aware that a private loan will require tax and credit history in most cases.
Step 1: Create a Federal Student Aid ID
You can create an FSA ID through the Federal Student Aid website. You will receive a password and a username. You will need your Federal Student Aid ID to submit documents like your Free Application for Student Aid form.
Step 2: Fill Out Your Application for Student Aid
This won't take too much time. As you complete the form, have your documents ready so that the information you include will be accurate. As you send this form, your Federal Student Aid ID will be used to identify you.
Step 3: Secure Your Documents
You will need the following documents:
- Your social security number
- Your driver’s license (if you have one)
- W2 forms from 2019 (if you have them)
- Your parent’s W2 form/s from 2019 (if you don’t have your W2 form)
- Any bank statements (yours or your parents’)
- Income tax returns
- Any financial records (yours or your parents’)
Step 4: Include Your Preferred Schools
In the Free Application for Student Aid Form, you can include five to ten schools of your choice. Each school will have a code. You can find them here.
Step 5: (Only If Unqualified for Federal Loan) - Apply for a Private Student Loan
Only proceed to this step if you are unable to get approved for federal aid or do not want federal aid.
As mentioned earlier, you will need a credit and tax history. For this reason, the following will be especially crucial to your application:
- W2 form
- Bank statements
- Income tax returns
- Investment records
If you lack these (and you probably do), proceed to the next step.
Step 6: (If Unqualified for Federal Student Aid) - Get a Co-Signer
A co-signer is someone who can meet the tax and credit eligibility requirements.
Your parents can be your co-signers. But co-signers can also be:
- Your spouse
- A legal guardian (if you are a minor)
- Friend (not ideal but possible)
There is a caveat; the responsibility of paying the loan falls not just on you but your co-signer as well.
Get Funding for Your Studies With a Student Loan
Issued by the government or a bank, a student loan can finance you for up to four years of college. Keep in mind that you will be applying for a loan. So, as you fill out the application, think about how you will be able to make payments post-graduation. In the meantime, get financed and make it count!