Student loan is one of the ways to manage your tuition fees. Student loans will save you from financial troubling.
According to the National Center for Education Statistics, in 2016, 46% of public university students received student loans, with a higher rate of borrowing at private nonprofit (59%) and private for-profit (65%) institutions.
The best option for a student loan is a federal student loan. Because federal student loans will give you long-term loans at low interest. You will then receive a grace period at the end of the term.
On the other hand, if you do not get a federal loan, you can apply for a private loan. Private loan will be a lot more expensive for you. Because the amount of interest on private loans is much higher. There is no grace period. Their terms and conditions are more complex.
Sources of Student Loan
You already know that you can get student loan from two options. Such as –
- Federal student loan program.
- Private student loan program.
These two options are the most common option of student loan, besides you can get loan from some more sources. Such as –
- Loan Refinancing
- Peer-to-peer loans
- Loans from family members and friends
Depending on your financial needs, year in school and your credit history, select the best option for you.
Related Article: How Does Student Loan Interest Work?
How to Get a Federal Student Loan?
Federal student loan is funded by the U.S. Department of Education so you will get this financial aid through your school.
To get a federal loan you have to submit a free application, which is known as FAFSA (Free Application for Federal Student Aid).
You will be asked for various information about your assets in bank and investment accounts, income levels, social security numbers, family, etc. After you provide that information, the financial aid office will determine how much loan you will receive.
It will come in the form of student loans, scholarships, grants etc. Your school will tell you how much to borrow.
Things to do before taking out a loan –
- You need to complete entrance counseling to ensure that you repay the loan.
- You must sign the Master Promissory Note to comply with the loan terms.
You do not need a credit or cosigner for a federal loan. So you can also get a loan with bad credit if the financial aid office is satisfied with your application.
If you apply for Direct PLUS Loans, your parents’ credit will be checked. However, it will not be a hard check. If you qualify for the PLUS Loan, your parents will be responsible for the interest on the loan. The time to pay the loan interest will start as soon as the loan is received.
If you are eligible for direct subsidized student loans, you do not have to pay interest as long as you are in school and up to six months after enrolling in college.
You can also get it if you want deferment. Undergraduate students are given direct subsidized student loans.
In the case of direct unsubsidized loans, you will have to pay interest on the loan while you are in school. Both graduate and undergraduate can apply for this loan.
Related Article: Types of Student Loans: Which Is Best for You?
How to Get a Private Student debt?
Banks, credit unions, state-based agencies and online lenders provide private student loans. To get a private student loan you need to apply to that institution.
You have to apply in accordance with the prescribed terms and conditions. After you apply, they will approve the loan if they deem you eligible.
Private loans require a very good credit score and high income for you or the cosigner. If you or your cosigner has bad credit then chances of getting a loan are very low. And if you have good credit, you will get a loan at low interest.
In private student loans you will not get the same advantages as federal student loans.
You will not get income-driven repayment plans facility on private student loan. You need to start paying interest as soon as you take out a loan. There is no grace period.
Related Article: How to Manage Student Loan Debt (Step-by-Step-Guide)
What kind of credit score do you need to get student loans?
If you or your cosigner credit score is at least 650, you will get a private student loan. The higher the credit score, the higher your chances of getting a loan. Your interest rate is more or less based on your credit score.
If the credit score is high then the interest rate is low and if the credit score is low then the interest rate will be high.
Is it hard to get a student loan?
Getting a student loan is not very easy. For example, you must demonstrate financial need to receive a federal student loan. You will get a federal loan only if your financial condition, family, social status shows that you have financial need.
In addition, your academic results also have an impact on getting a loan. And for a private loan, your credit score must be good. If you have a bad credit score then it will be difficult for you to get a loan.
What do I do if I can’t get approved for a student loan?
There is no guarantee that you will get a loan if you apply for a loan. You will only get a loan if the lender deems you suitable for the loan. There can be many reasons for not approving a loan.
You cannot receive a federal loan if you have good financial and family status. On the other hand, if you or the cosigner’s credit is not good, you may not get a private student loan.
So I would say if you fail to get a loan find another option. Such as –
Scholarships are available to cover tuition fees. There are various government, private and non-profit institutions that offer scholarships to students. This is why you need to keep a eye on your school website. There are also some websites like Scholarships.com and Fastweb that need to be searched regularly.
Grants are another way to pay for tuition. If you do not want to take a loan or do not get a loan then you can look for Grants. Grants are basically available for certain college programs or certain fields of study.
You can talk to your university professor or academic advisor about this. You can also search for scholarship websites.
A large portion of students work part-time to manage their education expenses. You can do on-campus or off-campus jobs. However, all colleges have their own rules. Find out from your college whether your college authorities support on-campus or off-campus jobs.
There are also rules on how long you can work. Especially foreign student’s part time job opportunities are relatively low. So do a research on this.
Consider a credit-worthy cosigner
Find a credit-worthy cosigner. But find someone who is trustworthy. If he/she is not trustworthy, you may be in danger in the future. Make sure that the cosigner bears equal liability for the repayment of the loan.
Can I get a student loan without my parents?
Yes, of course you can get student loans without parents. In this case you need to find a creditworthy cosigner. Anyone who is financially well-off can be a cosigner.