How to Apply for Student Loans: A Complete Guide

A student loan can help you fund your education but requires careful consideration. It’s important to find the right option and know how to apply for a student loan.

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Last Updated: 8/19/2022
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There are various ways to fund your education. Aside from applying for grants and scholarships, you may also opt to get a student loan.

That said, there are factors to consider before you borrow money. It’s advisable to start with a federal student loan first. The Department of Education guarantees these, and they typically have fixed interest rates. Repayment terms for federal loans can be flexible.

There are also private student loans. However, these are typically only necessary if you’ve already exhausted all other available sources of funds and those are still not enough to cover the cost of your education.

MoneyGeek breaks down the basic steps on how to apply for student loans to help you understand your options.

Key Takeaways

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There are several different ways to fund your education. Options include grants, scholarships and student loans.

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A federal student loan is usually the best option if you choose to borrow money. Interest rates are fixed, and repayment terms tend to be more flexible.

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Private student loans are best only if you have exhausted all other options. Repayment terms are less flexible. Interest rates and repayment programs depend on the lender.

What Are the Types of Federal Student Loans?

Going to college can be expensive. For many students, it’s hard to afford the cost. Borrowing money is one way of financing your education.

Generally, it’s advisable to consider a federal student loan first because the government guarantees it and rates tend to be fixed. There are four major types of federal student loans.

Direct Subsidized Loans

Undergraduate students who need financial assistance can apply for a Direct Subsidized Loan. This type of federal student loan can help pay for higher education expenses at a college or career school. This is a good option because the Department of Education will pay for the interest while the student is in school for at least half-time, for the first six months after graduation and during the deferment period.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are offered to undergraduate, graduate and professional students. Unlike Direct Subsidized Loans, there’s no need to prove financial need. However, interest accrues while the student is in school and is added to the total balance after the grace period.

Direct PLUS Loans

Graduate or professional students and parents of undergraduate students may also opt for Direct PLUS Loans. If you’re a graduate or professional student, you’ll have to apply for a Grad PLUS Loan. Parents must apply for a Parent PLUS Loan.

This loan requires a credit check. However, proof of financial need isn’t necessary. Applicants with an adverse credit history may qualify but must meet additional requirements.

The Department of Education serves as the lender for Direct PLUS loans.

Direct Consolidation Loans

A student may have multiple loans. In such a case, a Direct Consolidation Loan may help. It allows borrowers to consolidate their different federal student loans into a single loan for free.

To qualify, you must complete the Federal Direct Consolidation Loan Application form and submit a promissory note. Once your student loans are consolidated, you’ll only have to pay a single monthly payment through a loan servicer under the Direct Consolidation Loan.

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MONEYGEEK EXPERT TIP

There’s an application period for federal student aids. Check the Free Application for Federal Student Aid (FAFSA) deadlines.

The Federal FAFSA deadline for the academic year 2022–23 is June 30, 2023. Colleges may have different deadlines. State FAFSA deadlines may also vary.

How to Apply for Federal Student Loans

There are multiple steps you must complete when applying for a federal student loan — from checking eligibility to accepting your award letter. Below is a simple step-by-step guide to help you get started.

1

Check your eligibility

Before proceeding with the application process, it’s important to determine if you’re eligible for a specific federal student loan. The basic requirements include the following:

  • Must be a U.S. citizen or an eligible noncitizen
  • Must have a valid Social Security number
  • Must be enrolled at least half-time in an eligible program
  • Must maintain a Satisfactory Academic Progress
  • Must submit a signed certification statement on the FAFSA form
  • Must provide proof that you are qualified to get a college or career school education

For some types of federal student loans, you may need to demonstrate financial need.

2

Gather all necessary paperwork

Aside from the FAFSA form, you may need to submit additional documents. For instance, the proof of qualification to get a college or career school education may be your high school diploma or GED certificate. Depending on the school, there may be other requirements.

You will also submit a signed Master Promissory Note. This document proves that you promise to repay the loan and all accrued interest.

3

Fill out the FAFSA

Once you’re sure that you’re qualified for a federal student loan and have all the necessary documents prepared, you can fill out the FAFSA form. Take note of the deadlines.

You can sign the form electronically by creating an FSA ID through the Federal Student Aid’s website. You can also use this ID to sign loan contracts.

4

Review your student aid report (SAR)

After completing the FAFSA, you’ll get a SAR. This document contains the information you’ve included on the FAFSA form. Review it to see if you need to correct anything.

You may receive your SAR on paper or electronically. If you want to get an electronic copy, make sure you put an email address on your FAFSA form.

5

Accept your award letter

The school typically applies the loan amount toward your tuition, fees and other authorized charges. If there’s money left, you can use it for other education expenses.

For a Parent PLUS Loan, the leftover money will typically be given to the parent. Some schools may give it to the student with the parent’s permission.

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HOW MUCH MONEY CAN YOU BORROW IN FEDERAL STUDENT LOANS?

The maximum amount you can borrow will depend on the type of federal student loan you apply for.

Undergraduate students applying for either a Direct Subsidized Loan or Direct Unsubsidized Loan may borrow $5,500–$12,500 per year.

Graduate and professional students can borrow up to $20,500 per year under the Direct Unsubsidized Loans and get a Direct PLUS Loan to cover the rest of their education expenses.

Parents of dependent undergraduate students can apply for a Direct PLUS Loan to cover college expenses not covered by other financial aid.

How to Apply for Private Student Loans

The average student loan debt was $37,693 in 2021. In total, consumers have an outstanding loan debt of $1.75 trillion. Of this, 8% was from private lenders.

Private student loans, which are offered by banks, credit unions and other private lenders, are suitable for students in need of further financial assistance. If you think this type of loan is right for you, take note of the following steps.

1

Find the best loan options

The first thing you need to do is find the best loan for you based on your needs and circumstances.

It can help to shop around and research different lenders. Check with your school to find out if they have a list of preferred lenders. Compare loan offers and make sure you understand all terms and conditions.

2

Check your eligibility

Eligibility requirements may vary per lender. Typically, you must be a legal U.S. citizen or resident over the age of 16. You have to provide proof of your enrollment status. Depending on the lender, there may also be credit score and income requirements. If you’re an undergraduate student, you may need a co-signer.

3

Submit all necessary requirements

Once you have chosen a lender, your next step is to prepare the requirements. There may be a specific form you’ll have to fill out. In most cases, a lender will require the following information about you and your co-signer, if you have one:

  • Social Security number
  • Name, date of birth and address
  • Employment information, including proof of income
  • Gross annual income
  • Latest tax return
  • Name of your school
  • The date of your graduation
  • The cost of your education
  • The amount you plan on borrowing

These are only some of the standard items lenders ask for. Make sure you check the specific requirements with your lender.

4

Send your loan application

Complete the application form. Depending on the lender, you may be able to submit it online, through mail or in person.

5

Wait for approval and disbursement

Your application form will be reviewed once submitted. The lender will let you know if it gets approved. The processing time varies per lender, so clarify it with them.

If you get approved, you’ll likely receive an offer. Check the details and make sure all information is correct. Sign the loan document and return it to the lender.

The loan amount will typically be disbursed directly to the school. If there’s money left after all school expenses are paid, you may receive the balance. You can opt to return this or use it for other education expenses.

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WHEN SHOULD YOU USE A PRIVATE STUDENT LOAN?

While getting a private student loan may seem beneficial, there are certain instances when it’s not a practical choice. Here are some scenarios when taking out a loan from a private lender makes sense:

  • You’ve borrowed the maximum amount of federal student loans but still need money for your education expenses.
  • You have an excellent credit score and are highly qualified for a private student loan with interest rates lower than federal student loans.
  • Your financial situation changes, you need to pay for unexpected expenses mid-semester, and you have no other financial aid option.

Frequently Asked Questions About Student Loans

Applying for student loans can be confusing, especially for first-time borrowers. MoneyGeek answers some frequently asked questions to help you better understand student loans.

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