Going to college is exciting. It’s probably the first time you’re leaving home for a long period of time and the first time you’re somewhat fully independent. However, college tuition doesn’t come cheap, and if you’re just like most people, you’re probably considering applying for a student loan. In this post, we’ll list down a few things you need to know on how to take out a student loan.
The first thing you need to know is what your student loan options are and how much you’ll need. Remember that tuition is not the only thing that you’ll need money for — you should also factor in books and school supplies, and of course your living condition while you’re away in college. If you plan on being a full-time student, factor in your expenses.
There are two basic loan options available for you out there: the federal student loan and the private student loan.
Federal Student Loans
Federal student loans are issued by the U.S. Department of Education. You can apply for this loan by filling out the FAFSA (Free Application for Federal Student Aid). This type of student loan often has low interest rates and won’t require a credit check or a cosigner. The best part is, federal student loans have the potential for “loan forgiveness” wherein any remaining balance is waived after you’ve made a certain number of payments (but take note that this does not happen in every instance).
This student loan is granted on a first come, first served basis, so it’s important to fill up this form as soon as it becomes available on October 1. Each school and state will have a set deadline on FAFSA submission, so it’s better to get yours in early.
The Department of Education will determine the types of loans you’re eligible for and the amount of money you can borrow based on the information you entered at FAFSA.
Colleges mail financial aid offers at the same time they mail acceptance letters. If you get accepted to more than one college, take a look at the loan options you’ve received and how much they are. They tend to differ for every school. If you have any questions, it’s best to reach out to your school’s financial aid office.
Private Student Loans
If you’re thinking of going the private route, private student loans are available and issued by banks and credit unions. One of the advantages of applying for a private student loan is that it’s not on a need basis, meaning you have the potential of borrowing a higher amount, and you’ll get funding pretty quickly once you’re approved. Interest rates can be high, though, so it’s important that you review the different loan options.
Eligibility for private student loans is credit-based. You need to have a cosigner who has good credit because, as a student, you probably have not had the opportunity to build a good credit score yet.
Should You Go the Federal or Private Route?
A good rule of thumb is to only apply for private student loans once you’ve exhausted all your federal student loan options first. After all, you’ll get approved quicker since they don’t require you to have a cosigner, they have lower interest rates, and the payment options are more lenient.
Before applying for student loans, see if you can get access to free education first by checking if you qualify for scholarships and grants. Because although student loans are extremely helpful, they still need to be paid back. It’s worth a shot, and there’s nothing wrong in trying your luck.