There are two institutions that are willing to lend you money to go to college, if you meet their criteria: the government and private loan companies. That’s very sweet of them, but it’s on you to figure out what they get out of it as well as what you get out of it.
Usually, for them, it’s money. Be sure to learn—backwards and forwards—the interest you’ll be charged on the loan you take out, and the attached terms and conditions of repayment. Because your lender is going to hold you to it.
If you take a student loan from Uncle Sam, that’s called a federal student loan. These loans are funded by the federal government and come with repayment benefits like income-based repayment and the option to apply for forgiveness in certain circumstances.
On the other hand, applying for a private student loan usually means it comes from a bank, a financial services company, a credit union, a state agency, or even the school itself. You’ll need to compare interest rates, payback plans, and any additional charges that come along with their generosity.
How To Apply For A Federal Student Loan
For federal student loans, The U.S. Department of Education (DoEd) offers the William D. Ford Federal Direct Loan (Direct Loan) Program, making the DoEd your official lender. There are four types of loans to consider:
• Direct Subsidized Loans: for undergraduates who demonstrate financial need.
• Direct Unsubsidized Loans: for undergraduate, graduate, and professional students. Eligibility is not based on financial need.
• Direct PLUS Loans: made only to graduate or professional students, and also to the parents of dependent undergraduate students. No financial need is required, but a credit check is. If you’re applying yourself and your credit isn’t great, you may need to meet some additional requirements.
• Direct Consolidation Loans: these allow you to consolidate all of your federal student loans into one single loan, which is managed by a single loan servicer.
Your first step in applying for a federal student loan is to complete and submit a form called the Free Application for Federal Student Aid (FAFSA®). Once reviewed, your school sends you a financial aid offer, which may include federal student loans and how to apply for them.
Before you receive any federal student loan that you apply for, you’ll be required to complete entrance counseling , which is designed to help you understand your obligation to repay the loan. You’ll also be asked to sign a Master Promissory Note , which says you officially agree to the terms of the loan.
Filling Out Your FAFSA
It won’t cost you a thing to complete a FAFSA, so it won’t hurt to fill one out. When you submit a FAFSA, you’ll be able to figure out what kind of financial assistance you qualify for. Any student financial assistance programs authorized under Title IV of the Higher Education Act requires a FAFSA application. This includes federal loans, grants, and work-study programs.
How To Apply For Private Student Loans
You may want to consider a private student loan after you’ve explored your options for financial aid, grants, scholarships, and federal student loans. Private lenders typically have their own qualification criteria, but you may be eligible to apply for a private student loan if you’re an undergraduate or graduate student, pursuing a certificate, a student of the dental, medical, or other health professions, studying to take the bar exam, or relocating for medical or dental residencies.
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Your parents may also eligible to take out private loans for you, as well as any kind-hearted relative or friend of the family (a creditworthy one).
Private student loans can usually be used for any type of expenses related to your education, including tuition, room and board, fees, books, supplies, equipment, computers and electronics related to your schoolwork, transportation, and personal needs at school.
Here’s the information you may need when applying for a private school loan. You may not need every bullet point listed here, but it is always better to be prepared, just in case. Keep this as a handy checklist:
• Your name, address, phone number and email address
• Date of birth
• Social security number
• Employer’s name
• A proof of income (a recent pay stub)
• Bank account balances
• Monthly housing payment (rent/mortgage)
• School name
• Estimated cost of attendance
• Your current student status (freshman, full time, for example)
• Other financial aid you’re received so far
• Anticipated graduation date
• Cosigner and cosigner’s information
Private student loan lenders may let you submit your loan application online, and some may even be able to give you an answer in only a few minutes. Of course, underwriting timeframes and documentation requirements can vary greatly by lender.
Private student loans are granted based on your income, credit history, and credit score, among other factors. That means the lender looks at your history of borrowing money and paying it back. This history also determines your loan’s interest rate.
If your credit history is unestablished or not the greatest, you may want to consider your parents, a relative, or a friend as a cosigner to the loan: they will be responsible for paying it if you are unable to do so.
No doubt your private student loan lender will charge interest on your loan. There are two ways that interest is calculated: a fixed-rate and a variable interest rate.
Fixed-rate interest rates never change. They stay the same for the entire life of the loan, so you’ll always know what you are paying every month for the entire duration of the loan.
Variable interest rates could increase or decrease due to the financial index that determines the variable rate, or other factors as determined by your lender. Your total monthly payment could vary based on the loan’s current interest rate.
Know that not all private student loans are exactly alike. You’ll want to shop around and do your research. Here are some great student loan resources for that:
Private student loans can be great at bridging that gap in your financial plan, especially if the grants and student loans you receive don’t cover the whole nut.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.