For federal student loans and many private student loans, you have to complete applications each year. However, Citizens Multi-Year Approval*† for student loans requires only a single application, with follow-up soft credit checks for following years, saving you time and reducing stress. In this handy guide, we dive into how multi-year approval works, its benefits and other must-know information regarding student loan applications and disbursement timelines.
Do you apply for student loans every year?
Whether you need to apply for student loans each year depends on the type of loan and the lender. For federal student loans, you must apply every year you need funding by completing the Free Application for Federal Student Aid (FAFSA).
For private student loans, some lenders offer multi-year approval where you can apply for four years at once. Others require you to reapply each year.
Can you take out a student loan for all four years at once?
Whether you can take out student loans for all four years at once also depends on the source.
- Federal student loans can only be borrowed once a year or semester, up to the annual loan limit. Undergraduates can borrow up to $5,500 in Direct Subsidized Loans and $12,500 in Direct Unsubsidized Loans each academic year.
- Some private student loan lenders offer multi-year approval, which can pre-approve you for loans during your entire degree program. With soft credit checks each year, these lenders verify that your financial information is still current before disbursing the loan to your school.
Keep in mind that federal student loans tend to have lower interest rates, deferred interest and more repayment options than private student loans (though private lenders may also offer deferred interest).
What is Citizens Multi-Year Approval† for student loans?
With Citizens Multi-Year Approval for student loans, you only have to submit one student loan application for your entire degree program. Here's a look at how it works:
- You apply for a Citizens undergraduate, graduate or parent student loan.
- Citizens performs a credit check and review of your financial information (and cosigner's information, if applicable).
- Citizens will notify you if you qualify for multi-year approval and how much you qualify for until the end of your degree program.
- If you accept the terms, your funds are disbursed directly to your school.
- During the following years, Citizens completes a soft credit check, which doesn't impact your credit score.
- Your funds are disbursed directly to the school if your financial situation hasn't drastically changed.
This example scenario breaks it down a bit further:
- You and your family qualify for a $100,000 multi-year approval student loan for your four-year undergraduate program. You accept the terms.
- You determine you need $15,000 for your freshman year, leaving you with $85,000 of qualified funding for the remaining three years. Citizens disburses the $15,000 to your college.
- During your sophomore year, the tuition price increases and you receive fewer scholarships. You need $25,000.
- Citizens performs a soft credit check. If your financial situation hasn't changed, you're approved for $25,000 as a new loan under the initial promissory note, leaving you $60,000 for the remaining two years.
Multi-year approval benefits
The biggest benefits of multi-year approval student loans include:
- Fewer applications to fill out: You only have to submit one application for your entire degree program, simplifying the student loan process, saving time and reducing stress.
- Fewer hard credit checks: If you apply for a new student loan every year, your lender performs a hard credit check each time, reducing your credit score temporarily. With Multi-Year Approval, Citizens performs a hard credit check when you first apply and soft credit checks for the following years, which don't affect your credit score.
- Borrow only what you need: Predicting how much you need to borrow for your degree program can be difficult, especially since financial aid packages change each year.
- Simplified repayment: Instead of juggling multiple lenders, you can keep up with your loan information through one website, making it easy to review due dates, payment amounts, interest rates and other information.
Should I take a student loan for four years at once or one year at a time?
You should generally only take out student loans once a year or semester. And in most cases, that's all you can do anyway. Even with multi-year approval programs, the lender only officially approves additional funding each year after the soft credit check. If you no longer meet the minimum requirements of the loan, the lender won't grant you the additional cash.
There are three reasons you generally want to take out student loans once a year rather than all four years at once:
1. You could pay more in interest
Except with federal Direct Subsidized Loans, almost all loans will start accruing interest immediately after you borrow it, even while you're still in school. If you borrow money for your senior year of college as a freshman, you'll be gathering interest on that cash for three years before you even reach your last year of school.
If you wait until your senior year to take out the loan, you'll only start accruing interest at that point.
2. Circumstances can change
You never know what the future is going to bring. Your situation can change vastly between day one of your first year of college and day one of senior year. Students could opt to transfer schools with lower costs or drop out if they decide school isn't for them. Others have to leave due to family or medical emergencies. Schools can close and tuition prices change. You might face financial difficulties, or you could finish college early.
By taking out the money in one lump sum, you could be putting yourself in a deeper debt for no reason if any of these events or similar ones occur.
3. You might be tempted to spend it
Most lenders will only disburse the student loans directly to your school. However, a few transfer the money to your bank account instead. If you receive the entire four-year loan at once, it might be difficult to avoid the temptation to spend it, especially in emergencies. Using the cash early could result in a shortage for your education costs and possible legal or financial issues if the money isn't used for school expenses.
Choosing the right student loan lender
There are several factors to consider when deciding which private student lender to go with. You should compare interest rates, loan terms, fees, repayment options and loan limits. If more than one lender offers an enticing interest rate, multi-year approval for student loans could be a valuable tiebreaker.
Want to explore more options? Check out the Student Hub to see more ways to help make college more affordable or find the Citizens Student Loan®† that fits your life and budget.