How to Get a Student Loan & Student Loan Options

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You thought choosing a college was the hard part—until you were introduced to the world of student loans. All the fine print, confusing repayment terms, various interest rates, and differences in structures make getting a student a loan a pretty big headache, to say the least.

You’re financially responsible for whatever you borrow, and it’s up to you to learn (the many) ins and outs of what is considered a necessary evil by many. Getting a student loan doesn’t have to be all that laborious though, and while no one necessarily enjoys tacking on a ton of debt, it may be the ticket to getting your diploma.

We’re here to simplify matters and answer your question, “How do I get a student loan?” Beyond instructions, be prepared to learn about the different types of student loans, their pros and cons, who qualifies, and everything else you might need to know to make a sound decision.

Have a specific question in mind? Use the jump links below to go straight to the information you need.

  1. What are the different types of student loans?
  2. Federal Student Loans
  3. Federal Direct Subsidized Student Loan
  4. Federal Direct Unsubsidized Student Loan
  5. Federal PLUS Student Loan
  6. Federal Parent PLUS Student Loan
  7. Private Student Loans
  8. Can anyone get a student loan?
  9. How do I get a student loan from the federal government?
  10. How do I get a student loan from a private bank?
  11. What is the maximum amount of student loans you can get?
  12. Getting a Student Loan: Pros and Cons

What are the different types of student loans?

At the core, there are two different types of student loans: federal and private. Unfortunately, matters aren’t so cut and dry. Think of these two types of student loans as an umbrella term beneath which all sorts of loan structures trickle down from.

Federal Student Loans

Federal student loans are funded by the government. The U.S. Department of Education (ED) offers federal student aid to qualifying applicants to cover college costs such as tuition and fees, room and board, books and fees, transportation, and other related expenses (such as a school-related computer or necessary dependent care).

Federal student aid comes in many different shapes and sizes and may be awarded in the form of loans, grants, and work-study funds. The amount of aid a student qualifies for is income need-based, as determined by the difference between the cost of attendance (COA) and expected family contribution (EFC).

The EFC is an index number that factors in a student’s family’s taxed and untaxed income, assets, and benefits (such as unemployment or Social Security). This number also takes into consideration the size of the student’s family and the number of family members attending college during that application year.

Note: The EFC is what the federal government expects a student’s family to contribute, but this doesn’t necessarily mean that the family actually pays for that portion, if at all.

The COA accounts for tuition, room and board, transportation, and related attendance fees. The formula to determine financial need is found by subtracting the EFC from the COA:

COA – EFC = financial need

Generally speaking, the lower your EFC, the greater your financial need, and the larger the amount of federal student aid you qualify for. Financial need also varies by school; schools with an expensive price tag will also create a greater financial need.

Your student loan quote will be detailed in your financial aid award letter, but it’s important to note that it might not cover the full amount of need. Alternatively, a student may be offered more in loan money than necessary. He or she is not required to borrow the full amount, and you are allowed to accept or decline any aid offered in the package.

These funds are backed by the government, but issued by a chosen lender (also called “loan servicers”) such as a bank, credit union, or the student’s school. The terms and structure of the loan will be determined by the student’s eligibility, but the most common type of loan is a Stafford Loan (also known as William D. Ford Federal Direct Loans) in which the aid is awarded directly to the student.

There are two types of direct federal student loans you can get: subsidized and unsubsidized.

Note: When learning about how to get a student loan, you might have heard or come across the term, “Perkins Loan Program”. This program was once reserved for students who demonstrated remarkable financial need—offering government subsidies, fixed interest rates, and longer grace periods—but has been shut down as of September 30, 2017.

Federal Direct Subsidized Student Loan

Getting a student loan that’s subsidized is more desirable than an unsubsidized loan—it means that the government pays the interest on the loan while the student is in school, during the six-month grace period post-graduation, and during a period of deferment (postponement).

Because Federal Direct Subsidized Loans are interest-deferred, they are awarded to students who demonstrate financial need.

Federal Direct Unsubsidized Student Loan

Direct Unsubsidized Loans are not based on financial need, and interest will be charged while the student is in school, as well as during any grace or deferment period. Whereas interest does not accrue on Direct Subsidized Loans until after the student graduates, Unsubsidized Loans accrue interest from the moment the loan is dispersed until it is fully repaid.

The borrower has the choice to pay the interest off immediately or to allow it to accumulate and become capitalized (added to the principal balance of the loan). Paid interest is usually tax-deductible.

Both Direct Subsidized and Direct Unsubsidized Loans (dispersed between 7/1/18 – 7/1/19) have a 5.045% fixed interest rate for undergraduates, however, graduate students will pay 6.595% fixed interest. The term “fixed” means that the interest rate will not change during the borrowing or repayment period.

Federal PLUS Student Loan

If you’re wondering “How do I get a student loan” after finishing your undergraduate degree, a Federal PLUS Loan might be the solution. These are intended for graduate and professional students enrolled at least half-time at eligible post-secondary institutions.

Graduate students are still eligible for Unsubsidized Loans, but a PLUS Loan can help pay for expenses not covered by other forms of financial aid—at a much steeper rate. Federal PLUS Loans (dispersed between 7/1/18 – 7/1/19) have a fixed interest rate of 7.60% and a loan fee of 4.264%. Loan fees are typically deducted from each disbursement.

Federal Parent PLUS Student Loan

Parents interested in helping their children pay for college may also take out a Federal Parent PLUS Loan which is subject to the same terms as a standard PLUS Loan. It’s recommended that the student exhausts their eligibility for all Direct Loans before a parent applies to get a student loan due to the significantly lower interest rates.

All Federal Subsidized, Unsubsidized, PLUS, and Parent PLUS student loans have a loan origination fee of 1.068% which is deducted immediately at the time of disbursement.

Private Student Loans

Private student loans are an alternative financing solution for college. They’re made by various lending institutions such as banks, credit unions, and online lenders in order to pay for a student’s tuition, cost of living, school supplies, and related expenses.

Getting a student loan from a private lender may help cover higher education costs for both undergraduate and graduate programs. In most cases, private student loans are available to both students and parents, but young students might have trouble qualifying for the loan by themselves.

Unlike Federal Direct Loans, private student loans are not government-backed. For this reason, lenders are more likely to require confidence in their borrowers’ ability to repay the balance plus interest.

How to get a student loan from a bank or private lender will likely depend on a strong credit score and proof of income. Most young students entering college do not yet have an income or established credit, and will often require a cosigner to qualify for a private loan.

A cosigner (or guarantor) is typically the parent or close family member of a student who signs the loan and agrees to repay the debt in the event that the student cannot. Although a cosigner assumes part of the risk incurred with getting a loan, as they will become financially responsible if the loan defaults, they also stand to benefit from a strengthened credit score.

Whereas the interest rates on student loan quotes offered by the federal government are currently tied to the 10-year Treasury Note (with an additional percentage added on), interest rates on private student loans will vary by lender.

As of March 2018, interest rates on student loan quotes by private lenders range from 2.93% – 12.66%. These may either be fixed or “variable,” meaning the cost of interest can increase or decrease over the lifespan of the loan.

Those wondering how to get a student loan from a private lender should note that the student loan quote you receive—including the fixed or variable interest rate—will vary depending on your financial circumstances.

For example, those with higher incomes and stronger credit scores may be offered a larger loan amount and more favorable repayment terms than “risky” applicants with low credit and no income.

Private lenders are advantageous because they may be able to beat the rates on government loans—especially for graduate students and parents with student PLUS loans. They also help students who have maxed out their federal borrowing limit pay for higher education and related obligations, such as studying for the bar exam.

Can anyone get a student loan?

If you’re asking “How do I get a student loan from the government,” your eligibility requirements will likely be very different than those getting a student loan from a private lender.

Eligibility for Federal Direct Subsidized and Unsubsidized Loans

There are some basic eligibility criteria that you’ll need to keep in mind for the Federal Direct Loan Program:

Eligibility for Federal Direct PLUS Student Loans

If you’re wondering how to get a student loan for graduate school or on behalf of your dependent, bear in mind that a credit check will be performed on all applicants. In addition to the above qualifications, you must not have an adverse credit history.

Furthermore, you must be enrolled at least half-time at an eligible school in a program that specifically leads to a graduate or professional degree, or the parent of a dependent undergraduate enrolled at least half-time at an eligible school.

Eligibility for Private Student Loans

The qualifications to get a student loan from a private lender will vary depending on the lending institution; what might be deemed a sufficient credit score for one bank might be considered inadequate by the next.

How do I get a student loan from the federal government?

In order to get a student loan from the federal government, you’re required to submit a FAFSA (Free Application for Federal Student Aid) every year, which determines your eligibility for student financial aid. As the name implies, submitting this application is free and submitting the application does not result in a negative hit on the applicant’s credit score.

Note: If you’re interested in how to get a Parent PLUS student loan, be sure your child has submitted their FAFSA first.

Step-by-Step Instructions for Filling out FAFSA and Getting a Student Loan

  1. Create an FSA ID. Your Federal Student Aid (FSA) identification consists of a username and password which is used to log on and access certain ED websites. You’ll be required to input your FSA ID when accessing your financial aid information and when you electronically sign your student aid documents.
  2. Begin filling out the application. Pay particular attention to the FAFSA deadlines (June 30th 2019 for the 2018-2019 academic year); it’s important to submit your application as soon as possible in order to have your loans disbursed on time.
    If given the option to complete a “renewal” FAFSA form, do so—it’ll save you a substantial amount of time by automatically populating many lines on the application. Remember, how to get a student loan relies on filing FAFSA every year.
  3. Complete the student demographics. This section includes all major details such as your FSA ID, Social Security number (SSN), date of birth, and so forth. Parents filling out the FAFSA for a Federal Parent PLUS Loan, remember to input your child’s information, not your own.
  4. List up to 10 schools you’d like to have your FAFSA information sent. It’s a good rule of thumb to add as many colleges you’re considering as possible, even if you haven’t yet applied or been accepted.
  5. Determine Financial Dependency. The next section determines your financial dependency status and whether or not you’re required to submit the parental information. Independent students will be allowed to skip this section, as determined by dependency guidelines set by Congress.
  6. Submit Parental Information. If you’re determined a dependent student, you must enter your parents’ financial information—even if you don’t live with them.
  7. Use the IRS Data Retrieval Tool to import your (and your parents’, if applicable) financial information or supply it manual using the records shown on the psrevious year’s tax return.

Once your FAFSA is complete and free of errors, you must sign and submit it. The quickest way to do so is with your FSA ID.

Once submitted, you will receive a Student Aid Report (SAR) summarizing your FAFSA information. The school will then submit their financial aid offer thereafter, which you can accept or decline.

How do I get a student loan from a private bank?

If you’re interested in how to get a student loan from a private lender, you should shop around a bit before pulling the trigger immediately. As noted, interest rates and repayment plans can vary significantly between lenders.

Each lender will have a different application process, but almost always this process will include filling out your basic personal information, supplying necessary financial details and supporting documents, as well as identifying your preferred amount, interest rate type, and repayment option.

Unlike FAFSA, there’s no deadline on private student loan applications. This is good for those who face unforeseen costs mid-semester, but not so good for the forgetful types who wait last minute. If you’re getting a student loan from a private lender, don’t wait days or weeks before tuition is due, and be sure to find your cosigner in advance.

What is the maximum amount of student loans you can get?

Student loan quotes from private lenders may be much larger than what the government can offer. If you’re borrowing from a private lending institution, there’s unlikely a cap on the maximum amount of student loans you can take. In most cases, you can borrow the full amount you qualify for, which could be more than the COA.

However, the government places a cap on Federal Direct Loans and how much you can borrow every year (annual loan limits) as well as throughout the duration of your undergraduate and graduate programs (aggregate loan limits).

Federal Direct Subsidized Student Loan Limits

If you’re a first-time borrower getting a student loan after 2013, you are only eligible to borrow subsidized loans for 150% of your drafted program length. For example, if your degree is a four-year program, you’re only eligible to take out a subsidized loan for six years.

Federal Direct Unsubsidized Student Loan Limits

Unsubsidized loans aren’t subjected to a time limit, but they have an aggregate maximum of $31,000 for dependents and $57,000 for independents ($138,500 for graduate or professional students).

Federal Direct PLUS Student Loan Limits

The maximum student loan quote you can get on a Direct PLUS or Parent PLUS is the full COA, minus any other financial aid received. Parents who are divorced may take out a Parent PLUS loan, but the combined amount cannot exceed the loan limit.

Getting a Student Loan: Pros and Cons

If you’re wondering how to get a student loan from the government, it’s important to evaluate the pros and cons before borrowing.

Federal Student Loan Pros

Having a loan backed by the government offers certain perks, such as:

  • Fixed interest rates for the life of the loan
  • Applicant’s credit history isn’t a factor (with the exception of PLUS Loans)
  • Loan repayment is deferrable while in school
  • Six-month grace period following graduation
  • Flexible, income-based repayment plans may be available

Federal Student Loan Cons

Although getting a student loan from the government may offer low interest rates and flexible repayment plans, there are a number of disadvantages as well:

  • Applicants are required to submit a FAFSA and include extensive tax information
  • Financial need must be demonstrated to receive a Subsidized Stafford Loan
  • Subsidized student loans are not available to graduate students
  • Strict limits are placed on student loan quotes and maximum borrowing amounts
  • A 1.069% loan origination fee is immediately taken out of each disbursement
  • Rates for new loans may change yearly

Private Student Loan Pros

Getting a student loan from a private lender has certain benefits, such as:

  • No maximum annual or aggregate loan amount
  • No minimum enrollment requirement
  • No deadline for loan application
  • Not based on financial need
  • Interests rates may be better than Federal Direct Loans

Private Student Loan Cons

While opting to get a loan from a private lender may offer competitive rates and greater freedom, private student loans do come with drawbacks:

  • Fewer options for repayment plans
  • No student loan forgiveness
  • Variable interest rates may rise over the lifespan of the loan
  • Proof of income and credit are required
  • Qualification may depend on a cosigner

In the end, it’s up to you to evaluate the pros and cons before getting a student loan from either the government or private lender. There are decided benefits and inherent risks whenever you borrow money, and the solution that’s right for your circumstances might be different for someone else.

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