Whether you’re just preparing to start your college career or looking to continue your education with a graduate program, it’s important to get your finances in order early. Tuition, books, and other materials can add up quickly—and you don’t want to fall behind.
If you don’t have the savings to pay for these expenses in full, consider taking out a student loan. A student loan allows you to borrow money from the government or a private lender to pay your school expenses, although it must be paid back with interest over time.
To learn more about student loans and how they work, visit an online marketplace. You can compare lenders to find the different rates, terms and offers that are currently available.
In general, you should first check if you qualify for a federal student loan through the US Department of Education. These government loans offer several perks such as fixed interest rates, flexible payment schedules, and loan forgiveness eligibility. You don’t necessarily have to have oneor a co-signer. To see if you meet the criteria for federal student aid, fill out a free Federal Student Aid Application Form (FAFSA).
Don’t worry for those who didn’t get a government student loan or didn’t get enough financial aid to cover all their school-related expenses. You can always go the private lender route. Here’s what you need to know about private student loans.
How to Get Approval for a Personal Student Loan
A private student loan is offered by a school, bank, credit union, or other financial institution or agency. Unlike government student loans, interest rates on private student loans can fluctuate. Personal student loans can have fixed or variable interest rates – it depends on your loan type and lender.
For this reason, it is important to research student loan lenders. You should look at the terms and conditions of each lender and the interest rates they offer.
In order to qualify for a private student loan, it is important to:
- Proof that you are at least 18 years old and a US citizen
- Proof that you have a high school diploma or GED
- Proof that you are enrolled in a college or university
- Evidence from your school’s tax office that you need additional assistance (usually these offices have a form to share with the lender)
- Proof that you meet all income requirements
Good or excellent credit (if you don’t have strong credit, make sure you have a co-signer ready).
The National Foundation for Credit Counseling provides more details on everything you need to get a personal student loan. However, if you are confident that you can tick all the boxes above, then you have a good chance of getting a loan.
How to apply for a personal student loan
When it comes to preparing for a personal student loan, the application process is the easy part. In fact, many online marketplaces will walk you through the process step-by-step.
To do this, all you need to know is the following information:
- Personal information: Be prepared to give your name, address, date of birth, phone number, email address and more (have your driver’s license and social security card ready, just in case!)
- Tax Forms: Make sure you have access to up-to-date tax return documents
- Proof of income, employment and savings: Have your current W-2 form and other work-related documents – like paychecks – ready (if you don’t have a W-2, make sure your co-signer has one); You should also be prepared to share bank statements
- List of possible schools: Be prepared to share the list of schools (up to 10) you wish to send your FAFSA form to; Be sure to check out each school’s list of preferred lenders
- Credit-worthiness: You should know your credit rating and history – as most private lenders require a credit check
If you don’t know what credit score range you’re in, there are several resources you can use. Just answer a few simple questions and get your credit score fast.
Once you have submitted all of this documentation, the lender will let you know when to expect approval or rejection (some can even let you know in minutes). The timing varies depending on the lender.
Federal vs. Personal Loans: What’s the Difference?
The two most common types of student loans are federal and personal loans. Before deciding on either of the two, you should make sure that you thoroughly understand the differences between the two.
Typically, federal loans offer a bit more perks than private ones — but even a private student loan still offers some benefits, especially for those who aren’t eligible for aid.
Here are some key takeaways between the two types of loans, according to the US Department of Education’s Federal Student Aid Office.
- Interest charges: The interest rates are fixed
- Credit history: You do not need a credit check
- Loan Forgiveness: You may qualify for this depending on your situation
- Payment Plans: You are flexible and can change your repayment schedule after you get the loan; Some federal loans also offer income-based repayment plans
- Loan limit: It depends on what you qualify for; it is determined by the FAFSA
- Interest charges: They can have variable or fixed rates
- Credit history: A credit check is usually required; those without an established credit history will likely need a co-signer
- Loan Forgiveness: You do not qualify for student loan forgiveness
- Payment Plans: It depends on the lender, some offer flexible options, others require payments while the student is still in school
- Loan limit: It varies by lender
If you have good or excellent credit, you may be able to get lower interest rates and better deals from a private lender.
“Private lenders may allow you to borrow larger amounts based on need and credit history. If you shop around and can show proof of repayment ability, you may be able to find low interest rates compared to certain federal loans,” the Consumer Finance Protection Bureau explains on its website, although it does suggest you should still fill out a FAFSA or research other payment plans, which your school may offer first.