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Do You Need to Apply for Private Student Loans Every Year of School?

Key Takeaways

  • A select few private lenders offer multi-year approval for student loans.
  • Multi-year approval involves applying once and qualifying for a lump sum of funding to cover all four years of college.
  • The majority of private lenders require that you reapply for funding every year.

By Stephen Sellner | Citizens Bank Staff

So, you’ve decided where you’re going to college. That means you’ve researched a lot of things: the best on-campus housing, every sweatshirt the school has to offer, and — something not quite as exciting but still important — student loans.

Student loans can be an intimidating subject, especially if this is the first time your family is going through the financial aid process. How do you take out a student loan in the first place? One question comes up a lot in these situations: Do I apply for student loans once or once a year?

The answer depends on the lender. In the case of federal student loans, yes — you must apply every year you need funding. That means filling out the Free Application for Federal Student Aid (FAFSA) four times if you pursue a traditional four-year degree.

As for private loans for school, some lenders require that you apply only once (before your freshman year) while others make you reapply every year.

Let’s go over those two options in a bit more detail.

When you only apply once

An emerging trend with private student lenders is something called multi-year approval. However, only a few lenders offer this perk.

Here’s how it works: You and your parents fill out an application prior to your freshman year. The lender will do a hard inquiry into your credit and review documents that outline your family’s household income and other important information. Then, the lender will decide how much funding you qualify for — not for that one year, but for all four years.

When sophomore year comes around, you won’t have to fill out a new application all over again. Instead, you simply request additional funding and the lender will conduct a soft credit inquiry — which doesn’t impact your credit score — to confirm your income and other factors haven’t dramatically changed. Then, you can request however much you need that year as subsequent funding from your remaining qualified sum. This process is much quicker than filling out a brand new application each year.

Father and daughter embrace one another before the daughter leaves for college.

With multi-year approval, you can spend less time applying for loans and more time enjoying each other’s company.

Let’s say you and your family qualify for $100,000 to cover all four years of your program. You determine that you need $15,000 for your freshman year. After your initial multi-year loan, you’re left with $85,000 of qualified funding.

The following year, you discover that you need $25,000 since you didn’t get as much in scholarships as you did as a freshman. Rather than start all over again and fill out another application, you simply request the $25,000, the lender confirms your family’s financial situation is the same as it was last year, and you'll be approved for the $25,000 as a new loan under the initial Promissory Note. That $25,000 comes from that remaining $85,000, which leaves $60,000 to tap into for junior and senior year.

That $100,000 you qualified for can be pulled from throughout your college tenure. And if you don’t need the full $100,000, that’s fine. Only use what you need.

When you apply every year

Most private student lenders make you apply every year you need funding, just like federal loans — minus the FAFSA.

That means filling out a new application on four separate occasions, which involves gathering all the necessary paperwork, a hard credit inquiry, supplying income documentation as requested, and awaiting approval once a year until graduation.

Applying for funding every year requires more time to receive your funds, more inquiries into your credit, potentially submitting documents proving income, and more headaches.

What to remember

Multi-year approval is just one of a list of factors to consider when deciding which private student lender to go with. You still need to compare interest rates and other factors. However, if more than one lender offers an enticing interest rate, multi-year approval could be a valuable tiebreaker.

More information

Citizens Bank is one of the few private student lenders that offers multi-year approval. Learn more about that benefit and see what interest rate you qualify for.

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