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You’ve got a lot of options when it comes to getting student loans, and once you’ve figured out which is the best choice for you, you’ll be able to pay for your education and get on with your life.
Let’s start with the basics: government-issued loans and private loans. Government-issued loans are provided by the federal government, while private loans are provided by financial institutions or other organizations. Most students will borrow from both types of loan sources at some point during their undergraduate studies.
The amount that you can borrow from the government depends on whether or not you qualify for a subsidized or unsubsidized loan. If your parents make less than $80,000 per year combined, then your loan is considered subsidized because the government will pay for interest on your loan while you’re still in school. Unsubsidized loans don’t have this benefit; instead, it’s up to you to pay back both principal and interest each month during repayment periods (which usually begin six months after graduation).
Private loans are like mortgages: they require a credit check before they’re issued, so if there’s anything in your past that might affect how lenders view your ability to repay them—like an unpaid credit card bill or an old traffic ticket—you
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Applying for a student loan is easy, but you won’t get your money right away
If you need help paying for college and didn’t receive enough money through scholarships or work-study programs, you may need to take out a student loan to cover the costs of school.
Getting a student loan is a fairly straightforward process. You’ll apply for the loan through a federal or private lender, then wait for the funds to be disbursed to your school.
The interest rate on subsidized and unsubsidized loans is set at 3.73% for the 2021-22 school year.
You can usually expect the government to disburse funds about 10 days before classes start.
To determine your eligibility for federal student loans, you’ll need to complete the Free Application for Federal Student Aid, or FAFSA. You’ll need to meet federal, state, and college deadlines for aid each year, so make sure you’re up to date on current deadlines.
You’ll fill out this online form, which may take up to an hour to complete, and will need to have the following information handy:
Social Security number
Federal income tax returns, W-2s, and other records of money you’ve earned
Bank statements and investment records (if applicable)
Records of untaxed income
A Federal Student Aid ID
If you’re not a US citizen, your alien registration number
About one to three weeks after you submit your FAFSA, you’ll get a financial aid package that may include grants, scholarships, work-study programs, and loans. It’s probably a good idea to fill out the form even if you don’t think you’ll qualify for financial aid, as you never know what you may be eligible for unless you apply.
If you have the option, you’ll want to take out a subsidized loan over an unsubsidized loan. Subsidized loans are made based on financial need, and the government pays the interest on your loan while you’re in school. Financial need doesn’t factor into unsubsidized loans, and interest begins to accrue immediately. Both subsidized and unsubsidized loans have the same interest rate, which is set at 3.73% for the 2021-22 school year.
You won’t need a credit check with federal loans, with the exception of a Direct PLUS Loan, which is lent to the parents of undergraduate students or to professional and graduate students. This loan is not based on financial need and has a higher interest rate than subsidized or unsubsidized loans.
You’ll need to sign a Master Promissory Note if you choose to take out a loan. An MPN is a legal document you sign to promise to pay back your loan along with interest and fees. You’ll also determine the amount of money you want to borrow and your repayment term. The government won’t disburse your loan until you sign this document.
You can generally expect your school to get your federal funds about 10 days before classes begin. You may experience a 30-day delay if you are both a first-year student and a first-time borrower.
How to get a private student loan
You may be able to get approved for a loan in as little as three minutes with a private lender.
You’ll have to pass a credit check to get a private loan, and you may need a cosigner.
Your college will likely receive funds from a private lender two to 10 weeks after you accept your loan’s terms.
Private student loans often come with higher interest rates and fewer protections for borrowers than federal student loans, but you may need to take them out if your federal options don’t cover the cost of your school.
You can find different applications for private student loans on lenders’ websites. You’ll probably need to provide similar financial and identification documents as you would on the FAFSA, though the requirements will vary by lender.
Private lenders will run a credit check to figure out if you qualify for a loan, much like the federal government does with Direct PLUS Loans. Discuss details with your particular lender.
You can apply for a private student loan much more quickly than a federal student loan. You could get your rates and see whether you’re approved for a loan within a few minutes with some businesses, and most companies will give you an approval decision within 15 minutes.
If you want to know the status of your loan disbursement, you can usually check a lender’s online portal or call customer service. You’ll need to agree to terms similar to those in an MPN and sign a binding document.
Once you officially accept the loan, your college will likely get funds from a private lender within two to 10 weeks. You’ll get the funds in your personal bank account if you take out a direct-to-consumer loan, while your school’s financial aid office will get the money if you take out a school-certified loan.
Getting a student loan is a relatively painless process, but you may need to wait for a bit after accepting your loan to see the funds disbursed into your account.
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