September 28, 2022
Whether you are going back to college or just beginning your collegiate career, furthering your education can be exciting but overwhelming. A feeling of stress is common at this time. One of the main sources of this stress can be wondering how you will pay for your education. However, before taking on private student loan debt, there are other options that you should first consider that can help with your financial needs. Here is a guide on what you need to do before applying for a private student loan.
1.) Submit your Free Application for Federal Student Aid (FAFSA)
The Free Application for Federal Student Aid (FAFSA) is a form that can be filled out by college students to help them determine their eligibility for receiving federal financial aid. While FAFSA includes multiple sources of aid that one may apply for, there are two main ones: federal grants and student loans.
- Federal Grants are financial rewards given by the federal government for “beneficial projects”, which would be attending college in this case. Unlike loans, you do not have to repay federal grants, and, in most cases, they are based on financial need instead of merit.
- Subsidized Federal Student Loans are loans where the government pays the interest while you’re enrolled in school at least halftime, while you’re in the 6-month grace period after leaving school, and while your loans are in deferment. This means that once you start making loan payments, the amount will be the same as the initial amount you borrowed. Subsidized loans are only available for undergraduate students. In addition, these loans are financial need A disadvantage of subsidized student loans is that they have relatively low limits. This amount varies, depending on your class ranking and if you’re claimed as a dependent. The aggregate loan limit is $23,000.
- Unsubsidized Federal Student Loans are different from subsidized federal student loans in that the borrower is responsible for always paying the interest. While subsidized loans offer more benefits, unsubsidized loans are easier to get. In addition, unsubsidized loans also have maximum limits and may not cover the full cost of attendance. Again, the limits depend on class ranking and if you are a dependent.
2.) Apply for Scholarships
Another important source of financial aid is scholarships. Like grants, you do not need to repay scholarships. However, unlike grants, many scholarships are merit-based. Scholarships hold a range of benefits, from reducing financial burden to distinguishing you as a hard worker. However, avoiding student loan debt is one of the most important advantages of scholarships.
Scholarships can come from a variety of sources, including organizations, charities, businesses, colleges and universities, the government, and even individuals. With so many scholarships available, it can be difficult to know where to begin your scholarship search. However, there are resources available that can help guide you in the right direction. You can use the Lendkey scholarship search tool as a starting point.
3.) Estimate Your Financial Need and the Cost of Monthly Payments
Before applying for a private student loan, you should first calculate how much money you will need and if you will be able to afford the monthly payment. To first estimate how much you will need, take the cost of attending school and subtract your financial aid awards, grants, scholarships, you or your family’s out of pocket contribution, and any federal loans. The “cost of attending school” can vary between institutions. For instance, it may or may not include textbooks, supplies, and room and board among other things. To find out how your school defines the cost of attendance, you can visit your school’s financial aid office website.
You should also check your credit history before applying for a private student loan. Unlike federal loans, private student loans rates and terms may vary based on you or your cosigner’s credit profile. Lastly, use the to estimate what your monthly payment might look like.
4.) Find a Cosigner for Your Private Student Loan
A cosigner is a person who applies for a loan with someone who may not qualify on their own and takes equal responsibility for the account. While a cosigner may not be required, there are many benefits of using a cosigner when applying for a loan. Since it is often difficult for college students to have the required income and credit score to obtain a loan, cosigners can become very useful. Cosigners with a strong financial profile can strengthen your chance of being approved for a loan. In addition, using a cosigner has the potential to lower your interest rate. In the long run, a lower interest rate could save you thousands of dollars.
Once you have completed these steps, it is time for you to apply for your private student loan! From filing your FAFSA, to finding a cosigner, the process of a loan application can be time-consuming. It is best to start researching and preparing to pay for school earlier rather than later.
Please note that the information provided on this website is provided on a general basis and may not apply to your own specific individual needs, goals, financial position, experience, etc. LendKey does not guarantee that the information provided on any third-party website that LendKey offers a hyperlink to is up-to-date and accurate at the time you access it, and LendKey does not guarantee that information provided on such external websites (and this website) is best-suited for your particular circumstances. Therefore, you may want to consult with an expert (financial adviser, school financial aid office, etc.) before making financial decisions that may be discussed on this website.
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