Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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If you need to borrow money for college, your first step is learning how to apply for student loans the right way.
We recommend exhausting your options for federal student loans before turning to private sources, since federal loans tend to come with lower rates and more flexible repayment terms. But if you need additional funding, it could be worth applying for student loans from a private lender.
Here’s how to apply for a student loan from the federal government, as well as what to do if you need more funds:
How to apply for a student loan in 5 steps
The best thing to do when you need to apply for a student loan is to get going as soon as you can. Federal student loans are borrowed on a first-come, first-served basis, so you’ll have the most access to financial aid the earlier you apply.
What’s more, the first time applying could be a bit overwhelming, so the more you can get ahead of the game, the easier the whole process will be to handle.
1. Compile all the information you’ll need to apply for a student loan
2. Use these forms to apply for student loans and other aid
3. Fill out the FAFSA and CSS Profile online
4. Review your Student Aid Report
5. Await your financial aid award letter
1. Compile all the financial information you’ll need to apply for a student loan
To obtain federal student aid, you’ll have to fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA. As the name implies, the form is free and puts you in the running for financial aid for college, including federal student loans.
The FAFSA comes out in October each year, and you’ll need to apply the year before you’re planning on attending school — and then reapply each year until the year before you graduate.
Since there’s a lot of information on the form, it might be ideal to start compiling what you need in September. That way, you’ll have everything you need to apply the day the application comes out.
Here’s a list of some of the information you — or your parents — will need from to get ready for the FAFSA:
- FSA ID
- Driver’s license number (optional)
- Social Security Number or Alien Registration Number
- Federal income tax returns, plus records of untaxed earnings, including private financial aid
- Statements for bank and investment accounts and other assets
- List of up to 10 schools where you want your FAFSA submitted
Think you shouldn’t have to use your parents’ information on the FAFSA? Even if your parents don’t intend to help you pay for college, or if you live on your own, you might still be required to include them. Double check with our guide on FAFSA dependency status.
Finally, if you want to see for yourself which questions might be asked on the FAFSA, here’s a worksheet provided by Federal Student Aid to help you prepare.
2. Use these forms to apply for student loans and other aid
As you can probably already see, the FAFSA is your only path to applying for federal student loans. If you don’t fill out your FAFSA, you can’t get federal student aid for college.
However, there’s a lesser-known form that might be of use to you. It’s called the CSS Profile, and it helps you obtain institutional aid from specific colleges. You can fill this out to see if some of the colleges on your wish list offer aid to supplement what you get from the federal government.
The CSS Profile also unlocks access not just to loans, but also to grants. That means you might be able to take out even fewer loans for college, reducing the amount of debt you have to pay back.
But the CSS Profile isn’t free — there’s an initial $25 fee, plus an additional $16 for every school you add to the list (although there are also fee waivers for those who qualify).
An advantage of the CSS Profile is that colleges you thought were out of your reach financially could suddenly become a real option if you qualify for their aid. In that case, the small fee for the application might be worth it in the end.
3. Fill out the FAFSA and CSS Profile online
When it comes time to fill out your FAFSA and — if you so choose — your CSS Profile, it might be easiest to do so electronically.
You or your parents can register for access to the FAFSA through fafsa.gov. After you’re registered, the entire FAFSA can be filled out online, and even edited later if necessary. You can also apply via the FAFSA mobile app.
While you’re at it, you can skip some of the steps above by using the IRS Data Retrieval Tool to autofill much of the necessary financial information. However, it can’t hurt to gather the paperwork in advance anyway, just in case you run into issues using this tool.
And if you choose to fill out the CSS Profile, you can do so via College Board. To make sure your desired colleges are included, review the list of participating schools before you pay to fill out an application.
4. Review your Student Aid Report
After you fill out your FAFSA, you’ll receive what’s called a Student Aid Report, showing you a summary of all the information you’ve entered. It can take from three days to three weeks to get this report. It’s important to review it for accuracy as soon as possible and edit your FAFSA if necessary.
Remember, aid is first-come, first-served — don’t delay on fixing any errors that might exist on your FAFSA.
There might also be times when the school you included on your FAFSA selects you for verification. If that happens, you might simply need to provide extra documentation to confirm what you entered on your FAFSA. According to Federal Student Aid, this isn’t something to worry about — some schools might do this randomly, while others require it for everyone.
The most important thing is to provide whatever documentation you’re being asked for on time, as missing the deadline could mean not getting any federal financial aid.
5. Await your financial aid award letter
After completing your FAFSA, you’ll receive a financial aid award letter from the colleges you listed on the form. The timing of these letters varies from college to college. However, if you’ve already received admissions acceptance from a college but no financial aid award letter, you can call its financial aid office to inquire about the letter’s status.
Your financial aid award letter will tell you everything you need to know regarding what you qualify for. If you qualify for grants or a work-study opportunity, for example, that information will be there. If you only received an offer for student loans, then you didn’t qualify for other aid.
Among the loans offered to you, you might see a mixture of subsidized and unsubsidized loans. Subsidized loans don’t accrue interest while you’re in school, so it’s best to use those first (but only after applying for scholarships and grants and accounting for work-study program earnings).
Remember that you don’t have to take all the aid offered to you. Scholarships and grants don’t have to be repaid, but student loans do. Only take what you need, even if accepting more aid can give you a nicer lifestyle.
After all, considering the years it’ll take to repay the loans and all the interest that will accrue on them, you might find that the nicer lifestyle in college wasn’t worth it. Cover your tuition, room and board and books. Then use part-time work for other living expenses if you want to keep your student loan debt as low as possible.
And if you received award letters from more than one school, make sure you compare aid packages before deciding on your next steps.
How to evaluate private student loans when federal student loans aren’t enough
Unfortunately, there may be times when federal student loans come up short. Expected Family Contribution (EFC) plays a big role in how much you’ll be approved for — whether or not your family can or will help you pay for your tuition.
Note that the term “EFC” will be going away in the 2022-23 application cycle. It will be replaced by the term “Student Aid Index,” which, though similar to the EFC, will be calculated somewhat differently. This Student Aid Index will still be the benchmark for determining how much financial aid you receive, but it will no longer suggest that your family is “expected” to contribute a certain amount that they may or may not be able to afford.
Whether your EFC was too high or you ran up against the limits of federal student loan borrowing, you could fill a gap in funding by applying for a school loan from a bank, credit union or online lender. Here’s what you need to know about this type of student loan.
1. How to apply for student loans from private lenders
2. How to compare offers when you apply for a private student loan
3. What to be aware of when you apply for private student loans
1. How to apply for student loans from private lenders
Private student loans come from lenders outside of the government. You can apply for a student loan directly through those lenders the same way you’d apply for many other types of loans. As a first step, check out our guide to how some of the top private student loan lenders stack up.
When you apply, there’s a good chance you’ll need a cosigner. That’s because, at your age, you probably haven’t had an opportunity to build credit or a solid income yet — two factors that determine your chances of approval for a loan.
You might seek out a parent or family member to become your cosigner, but know what you’re getting them into, as well. If you default on your loan at any time in the future — even a few months away from total repayment — the loan will become their responsibility.
In other words, if you think the loan is too much for you ever to repay, don’t borrow it with a cosigner either.
2. How to compare offers when you apply for a private student loan
Let’s say you and a cosigner have applied for a few different private student loans to see which one gives you your best offer.
Currently, interest rates for private student loans range anywhere from as low as 1% to as high as 13%. Checking your rates with a few different lenders will help you find a student loan with the lowest long-term costs of borrowing.
However, there are a few other things to keep in mind when searching for a lender:
- Which lender offers you enough to fill your tuition gap?
- Does the lender with your best offer also have benefits such as deferment or forbearance?
- What do reviews of the lender have to say?
- Does the lender offer a soft credit check to apply for a student loan?
While finding the lowest rate is certainly a priority, don’t forget these other factors, as well. This is a lender you’ll likely have a relationship with for one or two decades. Be sure they have good reviews and options to help if you hit some financial bumps in the road.
When you’re comparing offers, use our student loan repayment calculator to crunch the numbers and see exactly what repaying your loan will look like.
3. Caveats to be aware of when you apply for private student loans
Private student loans can seem like a miracle tool when federal student loans come up short, but they’re not without risks. Here are a few issues to be aware of before you take on a private loan:
- Private student loans aren’t eligible for federal student loan forgiveness.
- Private student loans don’t come with income-driven repayment plans.
- Some private student loans have deferment or forbearance as an option, but this can vary by lender.
- If you take on a private student loan with a variable interest rate, that rate can jump up at any time — remember, you might be paying for 10 to 20 years, so that’s a definite risk.
- Private student loans aren’t regulated by the government the way federal student loans are, which can mean fewer protections for the borrower.
- Taking on a cosigner for a private student loan puts your cosigner’s finances at risk if you should ever pay late or default.
While these factors by no means have to be deal breakers, you’ll need to understand them before you apply for a school loan from a bank or another private entity. These are real financial products with real financial consequences (a fact that is also true of your federal student loans), so choose wisely.
Before you apply for a student loan, see what you can get at no-cost
There’s one important question to ask yourself before you apply for school loans and accept one (or more): Have you done all you can to obtain money for college?
Filling out your FAFSA is a great start to seeing what kind of federal scholarships, grants and work-study programs you can qualify for — not just student loans. But don’t stop there.
Here are a few more ways to get money for college:
- Apply for grants. You might find some specifically suited to your own situation, such as where you live or the subject you want to study.
- Look for scholarships. You don’t have to be a star student to get a scholarship. You can find them based on activities you do, things you’re interested in and even your heritage.
- Search for colleges with generous financial aid. Some colleges pride themselves on being able to offer aid to students in need. Give them a try, even if you think they won’t be able to help you.
Rebecca Safier and Andrew Pentis contributed to this article.
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