Learn everything you need to know about how to get a student loan and keep costs low.
Do you have your sights set on college? A degree can be the key that unlocks your future career, but it comes with a cost. Most students can’t afford tuition, books, and other academic expenses out of pocket. To make it work, they turn to student loans.
As of Q2 of 2019, Americans have 1.6 trillion dollars in outstanding student loans. In fact, according to the Quarterly Report on Household Debt and Credit by the Federal Reserve Bank of New York, student loans account for 11% of our country’s total debt.
Let’s say you need a student loan. Where do you start?
How to get a student loan
Navigating student loans can be confusing. But don’t worry! Below, we’ll walk you through the path to take to get the best deal.
1. Fill out and submit the FAFSA
The best first step you can take is to fill out the FAFSA (Free Application for Federal Student Aid). It’s a free application to determine your eligibility for financial aid from the federal government (including grants, work-study, and loans).
When you submit the FAFSA, you are applying for both need- and non-need-based aid.
Need-based federal student aid programs
The following need-based federal aid is provided to applicants who are deemed to have a qualifying financial need.
- Federal Pell Grant: The Federal Pell Grant program is for undergraduates who have a qualifying financial need. The maximum award is $6,195 for the 2019-2020 school year. However, the amount you get depends on the cost of attendance at your school, your expected family contribution, plans for attendance, and full-time or part-time status. Grants are available for every eligible student.
- Federal Supplemental Educational Opportunity Grant (FSEOG): FSEOG is another grant program for students in need. Participating schools receive FSEOG funds each year from the federal government. The financial aid office at each school administers the funds to students in need until they run out of money. Awards range from $100 to $4,000 per year, depending on a variety of factors (need, application time, other aid, and availability of funds at a school).
- Federal Work-Study: The Federal Work-Study Program provides undergraduate and graduate students with part-time jobs to help them pay for their education expenses.
- Direct Subsidized Loan: Direct Subsidized Loans are loans with slightly better terms than Direct Unsubsidized Loans. They’re designed to help students in need who are attending a technical school, career school, trade school, four-year college, or community college. The interest which accrues while the student is in school and during deferment periods is paid by the federal government.
To qualify for the above, you must show a qualifying financial need as per the guidelines of the federal student aid programs.
The following programs are not limited based on financial need.
- Direct Unsubsidized Loans: Direct Unsubsidized Loans are available to all undergraduate and graduate students, regardless of financial need. The amount you can borrow is determined by your school, according to your attendance costs and any other financial aid you receive.
- Federal PLUS Loans: Federal PLUS loans are for graduate students and parents of dependent undergrad students. They can cover some or all of the cost of attendance.
- Teacher Education Access for College and Higher Education (TEACH) Grant: TEACH grants offer up to $4,000 per year for students studying to become teachers. After accepting a TEACH grant, you must take certain types of classes and then do a certain job, or the grant turns into a loan. Click here to learn more.
Applying for the FAFSA is free and can help you to get grants (which you don’t have to pay back), as well as loans with favorable terms. It’s wise to pursue aid from the federal government before looking for a private student loan.
2. Shop private lenders
If you still need additional funding after submitting the FAFSA, it’s time to pursue private student loans.
Private lenders offer student loans with varying amounts, costs, terms, and eligibility requirements. While they’re typically more expensive than federal loans, you can find still competitive offers by shopping around.
You’ll need to research multiple lenders and compare their offers to find the best deal available to you. Before shopping around, ask your school if they partner with any lenders. Next, browse reputable leading student loan lenders.
How to compare private student loan lenders
When comparing private student loan lenders, look for:
- Low annual percentage rates: The lower the rate, the less you’ll pay in interest over the life of the loan. Most lenders publish their lowest available rate or their average range of rates. However, you may not be able to qualify for the advertised price. Pre-apply and get quotes to find out what each lender will actually charge you.
- Low fees: Ask about any and all fees, including those for application, origination, prepayment, late payment, etc.
- Loan terms that work with your budget: A loan term is the amount of time you have to repay your loan. The longer the loan term, the lower your monthly payment amount, but the more you pay in interest overall. It’s good to find a balance by choosing the shortest loan term whose monthly payment you can still comfortably afford.
- Suitable loan amounts: Different lenders offer different loan amounts. Ensure that the loan range available from a lender matches your needs.
- Positive reputation: Find out what past borrowers say about the lender. Look for those with positive reviews and recommendations.
- Eligibility requirements you can meet: Check to see if lenders list a minimum credit score requirement, or have any other requirements that may disqualify you. If you have a friend or family member with a strong credit history who is willing to cosign your loan, make sure that your desired lender allows cosigners. If you have no cosigner, make sure the lender doesn’t require them. Each lender’s requirements are different, so you should ones which offer you the best chance of qualifying.
- Direct or school-certified: Private loans are disbursed in two ways: directly to your bank account (direct loan) or school (school-certified loan). Find out which loan type each lender offers, as it can affect how fast you get your money and how you can spend it.
After shopping around and comparing the above factors for lenders, choose the one that offers you the best overall value.
Frequently asked questions about student loans
Now let’s learn the answers to frequently asked questions about student loans.
How long does it take to get a student loan?
If you are filing the FAFSA, it can take anywhere from three days to three weeks to analyze your data, confirm your eligibility, and provide you with a financial aid award letter. You can expedite the process by signing the form electronically and providing a valid email address.
Once you get your award letter, if you agree with the amount and terms, you must sign a Master Promissory Note. Afterward, you can expect to receive funds within 10 days of your first day of class. However, it can take up to 30 days longer if it is your first time borrowing money.
Private loans vary by lender. It can take anywhere from two to 10 weeks for you or your college to receive the funds.
How do I get a student loan without a cosigner?
While the majority of college students don’t have an established credit profile yet, it is technically possible to get a student loan without a cosigner.
You’ll still want to start with the FAFSA. If you need a loan afterward, look for private lenders who are more flexible with approval and who don’t require cosigners. For example, LendKey, Ascent, and Everence all say cosigners are optional.
However, approval is never guaranteed. Further, if your credit profile is limited, you will almost certainly be able to get a better rate with a reputable cosigner. If you can find a cosigner who is willing to help out in the short term, consider initiating a loan with a cosigner. Later, once you can qualify independently, you can drop them from the loan.
How can I get a student loan with bad credit?
Again, start with the FAFSA. Next, look for private lenders with more lenient eligibility requirements, or find a creditworthy individual to cosign the loan for you.
Find the best student loan solution for your needs
The right student loan for you depends on your circumstances. Can you get a cosigner? Is your school public or private? Are you going to be a teacher? Are you interested in working part-time on the side? Don’t forget to fill out the FAFSA first and take advantage of the offerings available to you. Afterward, if you still have an outstanding financial need, shop around to find the best deal on a private student loan.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.