Paying for college can feel like a daunting prospect – and applying for loans, a complicated process. Students can apply for federal student loans through the Free Application for Federal Student Aid (FAFSA) and private student loans through private lenders. In this guide, we walk you through how to apply for student loans, compare your financial aid offers, and accept offers to make paying for your degree a little easier.
How to apply for federal student loans
You need to complete the Free Application for Federal Student Aid (FAFSA) to receive federal student loans, as well as federal grants, such as the Pell Grant.
To apply for federal student loans, follow these 5 steps:
1. Gather information
You'll need some documents and a bit of personal and financial information to complete the FAFSA, such as:
- Your Social Security number
- Records of child support received
- Current balances of cash, savings and checking accounts
- Net worth of investments, businesses, and farm
- A list of schools you want to receive your FAFSA information
- Tax returns, which the U.S. Department of Education (DE) will pull directly from the IRS with your consent.
2. Fill out the FAFSA
Create a StudentAid.gov account. You'll receive your Federal Student Aid (FSA) ID, which acts as a signature. Most students are dependents and need their parents to complete the FAFSA with them. The student should finish their portion first, then invite a parent as a contributor.
Submit your FAFSA as soon as possible after it becomes available on October 1.
3. Review your FAFSA Submission Summary
An online FAFSA is processed in 1-3 days, while a paper form can take up to a week. You'll then receive your FAFSA Submission Summary, which provides your Student Aid Index (SAI). Your SAI is a number -1,500 to 999,999. The lower the number, the higher your demonstrated financial need and the more aid you may be eligible for.
College's financial aid offices use your SAI to determine financial aid packages, which includes federal student loans.
4. Compare financial aid offers and loans
Begin reviewing your offer letters which generally come in the spring. These letters will detail the types of aid and how much you qualify for, including work-study, grants, scholarships, and federal student loans.
Compare your financial aid offer letters to determine the best deal. Keep the total cost of attendance of each school in mind and note how much debt you will have after graduation should you accept their offer.
5. Accept and decline offers
Once you know what college you'll be attending, you can accept the financial aid package. You can accept all of it, some of it, or none of it – it's up to you. To accept federal student loans, follow the instructions provided by the school. Every college has slightly different requirements for accepting financial aid offers.
If you accept loans, you will need to complete the Loan Entrance Counseling requirement and sign a Master Promissory Note (MPN), which explains the terms and conditions of the loans.
Federal student loan funds are sent directly to your school to be used towards tuition, room and board, and similar expenses.
What types of federal loans can I get?
Remember, to qualify for any type of federal student loans, you must always first complete the FAFSA. There are three types of federal student loans you may quality for:
- Direct Subsidized Loans are available to undergraduate students with demonstrated financial need. Your college determines how much you can borrow, based on your financial needs. The Department of Education covers interest while you're in school and up to six months after you graduate or leave school.
- Direct Unsubsidized Loans are for undergraduate and graduate students. There is no financial need requirement, but the loan accrues interest while you're in school.
- Direct PLUS Loans, or Parent PLUS loans, are for parents of dependent undergraduate students that can be used to help pay for college. It may be listed on your aid offer, but it requires a separate credit check for adverse credit history. The maximum PLUS loan you can qualify for is the cost of attendance (determined by the school) minus any financial aid already received. For full details, visit the Federal PLUS Loan application page or contact your student’s financial aid office.
How to apply for a private student loan
You need to apply through private lenders, such as banks and credit unions, to receive private student loans. Approval depends on credit history, income, and other factors. Every private lender has its own application process for private student loans, but they all require similar information from applicants:
- Name of school
- Driver's license number
- Social Security number (or Alien ID number for permanent residents)
- Gross monthly income and one most recent pay stub
- Employer name, phone number, and length of employment (if applicable)
- Monthly rent or mortgage payment
- Anticipated graduation date (MM/YYYY)
- Loan amount requested
- Loan period for which funds are needed (can be an entire academic year, or a single semester)
- Cosigner name and valid email address
- Student borrower reference (name, address, and phone number of someone who is not your co-signer)
Some private student loan lenders ask you to submit documents to verify information such as income. Processing times vary. Once approved, you need to sign a promissory note to take out the loan. In most cases, the lender sends the funds directly to your school.
Tips before you begin your private student loan application
These tips can make it easier to apply for and get approved for a private student loan with a good interest rate.
- Find a cosigner. If you have little to no credit history, haven't built sufficient credit history, or have a negative or poor credit score, you'll likely need a cosigner on your student loan.
- Research rates. Federal student loan interest rates are fixed and may be lower than private loans, which can be fixed or variable. Variable rates change over the course of the loan terms, while fixed rate loans remain the same over the loan term. Compare offers from multiple lenders to see which will offer you the lowest interest rate and most favorable terms.
- Improve your credit. Private student loan lenders review your credit history (and cosigner's credit history), among other factors. A higher credit score could increase your chances of getting approved for a loan with a lower interest rate.
You're one step closer on your college journey
Student loans are a part of many students' college journeys, and understanding the process, terms, and conditions can help you make smart financial decisions for your education now and in the future. Always read everything before you sign and talk to your school's financial aid department if you have any questions.
Ready for the next step? Explore all the different ways—scholarships, grants, federal aid—you can help pay for college. Visit the Citizens Student Hub today to get started.
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