Private Student Loans for March 2023
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How To Apply for Student Loans

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You may find you need to apply for student loans to help cover the rising cost of college tuition. After all, about 55% of bachelor’s degree recipients in 2020 graduated with at least some student loan debt.

This step-by-step guide breaks down how to apply for federal and private student loans, as well as additional funding sources to consider.

Note that federal student loans are generally better than private ones since they offer lower rates and flexible repayment terms. But if you need additional funds, private student loans can help.

Before you begin: Gather the paperwork

You’ll need to gather essential financial information when applying for college loans. The exact forms will vary based on the lender, but preparing in advance can help the process go as smoothly as possible.

If you’re applying for federal aid as a dependent, you’ll likely need to include your parents’ information. The same applies if you’re adding a cosigner to a private student loan.

Here are the basic student loan documents you and your parents/cosigners should have on hand before applying:

  • Credit score and history: Federal student loans don’t require a credit check (except for parent PLUS loans), but private student loans typically do. It’s a good idea to check your credit for free before applying for private loans to gauge what rates you can expect.
  • Personal information: Such as address, date of birth, phone number and email address.
  • Valid identification: Documents to prove your U.S. residency status, such as your Social Security number. You’ll need to provide your Alien Registration Number (or A-Number) if you’re not a U.S. citizen.
  • Employment and income verification: Recent pay stubs, W-2 forms or self-employment verification. Since undergrad students are typically unemployed, this info will be relevant for your parents or cosigners.
  • Recent tax documents: Make sure to include records of untaxed earnings, such as private financial aid.
  • Bank and savings account statements: You’ll also probably need to provide documents showing the value of your assets, if applicable.
  • Payment obligations: This usually refers to rent or mortgage expenses, auto loans and other student loans.
  • School information: The Free Application for Federal Student Aid (FAFSA) allows you to list up to 10 schools. For private student loans, you may need to list the specific accredited school that you plan to attend, along with the estimated start and graduation dates, cost of attendance and how much you want to borrow.

When applying for private student loans, you must also fill out the Department of Education’s Private Education Loan Applicant Self-Certification form to ensure that student borrowers understand their options for loans. You can get this specific form from your school’s financial aid office.

Pro tipMake sure to save all necessary documents to ensure a speedy application next time around, since you have to reapply for both FAFSA and private student loans every year.

Federal student loans: How to apply

Federal student loans are backed by the government and offer low, fixed-interest rates, several repayment plans and access to loan forgiveness programs. Because of all these perks, it’s usually best to take out as much in federal student loans as you’re allowed before considering private loans.

Federal student loans are issued on a first-come, first-served basis. Because of this, it’s also best to apply as early as possible (applications open in early October).

Here are five steps to follow when applying for federal student loans:

Private student loans: How to apply

Private student loans can help cover gaps when federal student loans come up short, but they come with certain risks.

Some downsides to private student loans include being subjected to a full credit check, accruing interest upon disbursement, ineligibility for federal student loan forgiveness and income-driven repayment plans and limited options for deferment or forbearance.

While these factors don’t need to be deal breakers, you’ll need to understand them before you apply for a school loan from a bank or another private entity. Again, it’s best to exhaust federal options first. About 54% of undergraduates borrow private loans before they’ve used all of their available federal financial aid.

Here are five steps to follow when applying for private student loans:

Alternatives to college loans

Both federal and private student loans serve their purpose by helping millions of students achieve their educational goals. However, keeping an eye open for other options to help minimize your overall student loan debt is important.

Here are guides to some other ways to potentially lighten your financial burden:

These alternative options, along with low-interest student loans, can help make it possible to earn a college degree without taking on too much debt. Ultimately, it’s best to minimize the high-interest loans and maximize the scholarships, grants and federal aid.

 

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