In recent years, not only the number of schools and colleges has increased, but also their standards have been on the rise. This means that it becomes more and more difficult for students to fund their education. After all, a college education is becoming increasingly expensive with each passing day, and living standards become higher and higher.
But, there are ways you can fund your education without sacrificing the quality of your education. There are a lot of programs such as education loans, financial aids, scholarships, and grants that allow students to pursue their college degrees without worrying about the expenses.
Every program has its own set of eligibility criteria, benefits, and drawbacks. This article will briefly touch upon education loans, how they can help you finance your higher education, and how you can apply for one. So if you are a student or parent looking for answers to your questions about student loans, you are in the right place.
What are student loans anyway?
A student loan is a type of financial aid offered by the Government or any private lending company to finance your education. The money you borrow can be used for paying fees, accommodation, course materials, living expenses, etc.
But unlike scholarships, student loans carry interest and repayment terms. You have to repay the amount within a certain period along with interest. Student loans can be a headache if you are not aware of the details. There is about $1.58 trillion outstanding student loan debt in the U.S.!
It can quickly turn into a lifetime debt if you do not repay the loan on time. So, before you apply for a student loan, make sure that you understand all the terms and conditions in detail.
Types of student loans:
There are two types of student loans: Federal Student Loans and Private Student Loans.
Federal student loans
Federal student loans are issued and serviced by the Government. The eligibility criteria for Federal loans are different from each other. These loans do not require a cosigner, collateral, or even certain credit scores. Federal student loans are mostly given to students who did well academically and did not get enough funds through scholarships. The interest rates are relatively low than private student loans. Also, there are four types of Federal student loans:
1. Direct Subsidized Loans: This is a need-based loan for undergraduate studies. It is given to students pursuing their first bachelor’s program or higher degree.
2. Direct Unsubsidized Loans: Direct Unsubsidized Loans are loans given to qualified undergraduate, graduate, and professional students without regard to financial need.
3. Direct PLUS Loans: Direct PLUS Loans are for graduate and professional students and parents of undergraduate students to help them pay for expenses not covered by other financial aid. Eligibility is not determined by financial need, but a credit check is required.
4. Direct Consolidation Loans: With Direct Consolidating Loans, students can save money in the long run. You may reduce your interest costs by combining your eligible federal student loans into a single loan with a single loan servicer.
Private Student Loans
Private student loans are offered by private lenders such as credit unions, banks, etc. It can be used to finance any expense related to your college education. The eligibility criteria are more or less the same as that of Federal loans. But these loans are given to students who have a cosigner and good credit scores, and some even require collateral. Private student loans usually carry higher interest rates than federal loans do. You can find out if you are eligible for a private student loan by using the comparison tool on our site.
How much can I borrow via student loans?
When it comes to federal student loans, undergraduate students can borrow up to $3,500 – $23,000. On the other hand, graduate students can borrow up to $138,000. There is also a yearly limit which depends on your education level and status.
As far as private student loans are concerned, the amounts you can borrow vary from lender to lender. But to give you an idea, you can usually borrow up to the total cost of your education.
How to apply for a student loan?
The application process for student loans depends on the type of loan, your lender, and your college. First, let’s take a look at the process of Federal student loans.
Federal student loans
Here are the steps to apply for federal student loans.
1. Gather the necessary documents: Here is the list of documents that you might need
- Date of Birth Certificate
- SSN (Social Security Number)Verification of In-State Residency
- Official Transcripts from High School or College
- GED certificate if you have a GED certificate for high school diploma
- Documentation that verifies the status as an undergraduate or graduate student
2. Fill out the FAFSA form: The next step would be to fill out the Free Application for Federal Student Aid form. Even if you don’t believe you won’t qualify for the loans, it is still a good idea to complete it.
3. Check your student aid report: After you complete the form, you will receive a Student Aid Report (SAR), which summarizes your eligibility for student loans.
4. Review your financial aid letters: Your college or university will send you a letter that tells you exactly how much money you can borrow and what criteria you must meet to receive the loan.
5. Talk to your school’s office: Different schools have different rules and formalities. You should talk to your school’s office regarding any additional paperwork you might need or how they distribute the loans.
6. Receive your loan: Upon receiving your student loan, you will get an award letter that tells you how much money you can borrow.
Private Student Loans
When applying for private student loans, make sure to read all terms and conditions carefully.
1. Find a suitable lender: Look for lenders who offer reasonable interest rates and flexible repayment options.
2. Compare different offers: It is good to compare different offers from various lenders before applying for the loan. This will help you find out which one best suits your needs.
3. Check your eligibility: Make sure you are eligible for the loan according to your lender’s requirements. You might need a cosigner, credit history, good income, etc. Most lenders post their eligibility criteria on their official websites. So you can visit their website to get a better idea or use our private student loan eligibility checker.
4. Gather all the necessary paperwork: Just like federal student loans, you might also be required to provide some documentation. For instance, you might need a birth certificate, social security number verification, a transcript from your high school or college, and an official letter from the school regarding your enrollment status.
5. Fill out the application: After getting all the necessary documents ready, fill up their respective forms and submit them with the required documentation.
6. Wait for approval: A loan application can take anywhere from a few hours to several weeks. It all depends on your lender. Once they confirm your eligibility, you might receive the money within a few days.
Federal student loan vs. Private student loan
There is no denying that federal student loans are more beneficial than private student loans as they offer more flexibility, lower interest rates, and repayment options.
However, federal loans are also limited, and you might need to secure a private student loan as well to cover the shortfall.
The main difference between federal and private student loans is that federal loans are more flexible and manageable. Also, you might not need to pay the interest or principal during the grace period. However, private student loans lack these benefits and are more expensive than federal loans.
Things to consider before applying for a student loan
Student loans can be complicated if you don’t know much about them. So it is always better to prepare yourself before applying for a student loan. Here are some things that you should consider before deciding to apply for a federal or private student loan:
1. Opt for scholarship programs before applying for a student loan: If you are eligible, you should apply for the scholarship program because it can reduce your loan amount by 100%.
2. Compare different offers: It is good to compare different offers from various lenders before applying for the loan. This will help you find out which one best suits your needs.
3. Check your eligibility: Make sure you are eligible for the loan according to your lender’s requirements. You might need a cosigner, credit history, good income, etc. Most lenders post their eligibility criteria on their official websites. So you can visit their website to get a better idea.
4. Opt for federal student loans: Federal student loans are more beneficial than private ones. Before applying for a private loan, you should always consider federal student loans first.
5. Prepare for the repayment: If you have taken out a student loan, then there are you will have to repay it someday. Make sure you understand the terms and conditions of your loan so that you can manage whatever repayment is given to you promptly.
Final thoughts:
So there you have it! Student loans are one of the most useful financial tools for students. But they can be complicated if you don’t know much about them. In this article, we have provided a brief explanation of federal and private student loans. We have also offered several tips for students looking to apply for a student loan. If you have any questions, please ask us in the comments below!
I need a scholarship loan to fund my studies.
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We have loan programs available to international students studying at an approved school in the United States or Canada. We also have loans for U.S. Citizens / permanent residents abroad.
You should apply for a loan after being accepted and enrolled into an eligible school.
You can see eligible schools here: https://www.internationalstudentloan.com/eligible_schools/all/
You can start the application process and find all available lenders here: https://www.internationalstudentloan.com/apply/