Scholarships are a beautiful thing, helping to turn your dreams of attending college into a reality.
But unless you’re a 5-star athlete or an exceptionally gifted scholar, your scholarships and grants aren’t likely to cover all of your college expenses.
The average student entering college will likely need to take out student loans to help with the cost of tuition, based on the latest Education Data Initiative, 45.3 million borrowers carry student loan debt, with 92% holding federal loans.
The student loan process starts with the application, which differs for private and federal loans.
In this guide, you’ll learn what steps you need to take to find the best student loans for your needs.
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Federal and Private Loans
Before you sign on for the first student loan you see, you need to understand the types of loans available to you.
Here are a few key differences between federal and private student loans that can help you decide what loans are best for your needs.
In case you need a quick refresher, federal student loans are those offered by the federal government to parents and students to help pay for college.
They come with fixed interest rates, flexible income-driven repayment plans, forgiveness, and subsidized and unsubsidized options.
These need-based loans also come with a 6-month grace period following your graduation, during which time you aren’t required to make payments.
You apply for federal student loans by submitting the FAFSA, which we’ll cover in depth below.
Private student loans, on the other hand, are those offered by banks, credit unions, and all lenders other than the federal government.
These loans come with both variable and fixed interest rates and are typically unsubsidized.
They also lack income-driven repayment plans, so you should pay close attention to the terms before getting the loan. You’ll be glad you did when it’s time to repay your student loans.
Unlike need-based federal loans, private student loans are based on your credit and income and come with higher borrowing limits, which is good news for some applicants.
While interest rates can be higher on private student loans, if you have a solid credit score, you can get interest rates that compete with federal loans.
With a better idea of how student loans work, here are some tips for choosing the best loans for your needs.
Which Type of Loan You Should Choose
There’s no one-size-fits-all approach to student loans. If you’re a high-income individual with stellar credit, private student loans may be right up your alley.
If, however, you’re a lower-income individual with a subpar credit score, you may find that federal student loans are a more viable option.
You should let your financial situation help guide your decision on what loans to apply for.
In general, you’ll want to start with federal student loans, as they offer unique benefits, and pursue private loans once you’ve maxed out your federal resources to cover any remaining college costs.
Often, families find that a combination of private and federal loans meets their needs well.
If you find yourself in that situation, here are the steps you need to take to apply for federal and private funding.
How to Apply for Federal Student Loans
Your first step in the student loan application process is to fill out the FAFSA.
Short for the Free Application for Federal Student Aid, the FAFSA is the key to unlocking federal loans. Here’s how it works.
How to Complete the FAFSA
The FAFSA will factor in your tuition, income, and financial need to determine your eligibility for federal student loans, along with some scholarships and grants.
You should be able to complete the application in less than an hour if you have the documentation and info below on hand.
To complete the FAFSA, which is available October 1, you’ll need to provide your and your parents’ Social Security Numbers and your driver’s license number.
You’ll also need to provide your parents’ tax returns (and yours if you have them), documentation of untaxed income, and data on your investments and bank accounts.
Once you’ve submitted the online application successfully, you’ll receive an email with a link to your Student Aid Report anywhere between a few days and a few weeks.
Your report will tell you what type of aid you’re eligible for and what your borrowing limits will be.
How to Apply for Private Student Loans
Private student loans function a bit differently than federal student loans. While federal student loans all come from the same place, private loans come from a number of lending sources.
What You Need to Apply for Private Student Loans
If you’re looking for additional funding beyond federal loans, or you or your parents have good credit and want to compare all of your options, your next step is to apply for private student loans.
To access the best interest rates and get the most out of your student loans, you need a strong credit score and a good debt-to-income ratio, a number that suggests you won’t have trouble keeping up with your loan payments.
If you don’t have either of those credit factors in check, as many young borrowers don’t, you can still access great rates on private loans with a cosigner.
In addition to the qualifying factors above, you’ll need to have some information on hand, like loan amount, college or university name, type of program, and whether or not you plan to use a cosigner.
Where to Apply for Private Student Loans
One of the most popular private lenders on the market is College Ave Student Loans, a company dedicated to providing borrowers with a better student loan experience.
College Ave offers tailor-made loans and refinancing options for undergraduate and graduate students, building them around your unique financial needs and goals.
They also offer a variety of tools and educational resources, like student loan calculators, to help you plan out your college financing.
The application process is quick and easy, matching you with the best student loan offers you qualify for in a matter of minutes.
You can also use the pre-qualification tool that allows you to see what rates you may qualify for without a hard check on your credit.
Bottom Line: Applying for Student Loans
You have a whole world of student loan options at your disposal, and fortunately, applying for them is a quick and simple process.
Whether you envision yourself getting by with federal loans or think you might benefit from private loans, take a few minutes to apply for both and see what your best options are.
With a clear idea of the fees, rates, borrowing terms, and lenders available to you, you can lay out a doable financial plan and get your college education rolling.