How to Get a Loan For College
Getting a loan for college is something that both students and their parents opt for when paying for college. However, a student loan is a big financial commitment. And, it is important to learn every aspect of the loan so that you understand what your need is.
Keep in mind that students loans have to be paid with interest. Hence, before committing, make sure to secure the fund from different sources that you don’t have to repay. Such options include grants, scholarships, and savings. So, how do get a loan for college? Continue reading the post to learn more about it.
GETTING A COLLEGE LOAN FOR YOUR GRADUATION:
Unless your parents earn large salaries or have saved enough money, you don’t need to take a college loan. Moreover, working your way through this time is daunting. That’s because very few students can make enough money to repay the loan while taking classes.
As such, student loans are becoming a common affair in almost every household. Here is how you can get a loan for your college.
1. START BY FILLING OUT THE FAFSA
One of the important forms that you need to fill out when applying for a college loan is filling out the FAFSA (Free Application for Federal Student Aid). The FAFSA will ask questions that relate to the income and investments of both the student and their parents.
Also, you need to tell other relevant things such as if the family needs to enroll more than one child in college simultaneously. Depending on the information that you submit, FAFSA will evaluate the Expected Family Contribution or EFC. This is the amount of money that the authority believes you can pay for the college in the upcoming years as financial resources.
Furthermore, you can submit the application for FAFSA online by visiting their official website. However, to save time, gather all the required information for the account before you begin to fill out the form. Remember that you should complete the FAFSA when applying for aid. And, you need to do that every year if you wish to receive aid thereafter.
2. UNDERSTANDING AND COMPARING YOUR FINANCIAL AID OFFERS
The office at your college will use the information gather from the FAFSA to decide how much aid you need. And, they do that by deducting the EFC from COA (cost of attendance). Mandatory fees, tuition fees, boarding charges, and other kinds of expenses are included in COA.
You can avail of this information from the official website of the college. To ensure there is no gap between COA and EFC, colleges tend to provide a separate aid package that includes federal Pell Grants, loans, and paid work-study. On rare occasions, you need to repay grants.
Grants are for students that the government provides as “exceptional financial needs”. Moreover, award letters differ from one college to another. Hence, you must compare them. When it comes to loans, you should consider how much the schools are offering. And, whether they are subsidized or unsubsidized loans.
Subsidized loans such as grants are for students that need exceptional financial help. The advantage of the subsidized loans is that the Education Department covers the interest while you are a half-time student for a minimum period of 6 months after graduation. Unsubsidized loans are for the families who need to pay the accrued interest immediately regardless of need.
However, interest and payments on these kinds of loans were suspended during 2020 because of the global pandemic. And expected to resume in early 2022. When you qualify for such loans, colleges might offer you to choose between subsidized and unsubsidized loans.
You can have an upper hand by choosing federal loans over a student loan from private lenders or banks. The federal loans have fixed, low-interest rates and provide you with flexible repayment options.
But the amount of money that you can borrow has limitations. For instance, most undergraduates during the first year can borrow a maximum of $5500. Out of this amount, more than $3500 is treated as subsidized loans. Also, there are limitations on how much you can borrow during the overall college course.
If you have plans to borrow more than that, another great option is to choose Direct PLUS Loan. These kinds of loans are intended for undergraduates as well as for graduated students and professionals.
The PLUS loans come with higher limits ad are available irrespective of need. But the parent borrower should prove their creditworthiness by having good credit.
3. CONSIDER TAKING A PRIVATE STUDENT LOAN
Another great option that you can choose to borrow money other than a federal student loan is by applying for a loan from a credit union, bank, or other financial institution. You can avail of private loans regardless of need. Moreover, you can apply for these loans by filling out the forms provided by those institutions.
To secure a private loan, you need to get someone with a good credit rating such as your parent or a relative. Also, you can get the loan if you have a good rating under your name. However, having a lesser credit makes it difficult to qualify for a student loan.
Private lenders will scrutinize your credit history and income. And, being a college student you are likely to have no credit at all or a poor credit rating. But some lenders provide college loans even with bad credit.
In general, private loans come with higher interest rates compared to federal loans. Also, the rates are variable rather than fixed. Furthermore, private loans lack flexible repayment options as well.
4. CHOOSING THE SCHOOL
The right amount of money that you need to borrow for a college varies from one to another. Hence, choosing a college is another great factor when considering student loans. Graduating from a college with lots of debts is a burden that no one likes to carry.
It can derail or limit your aspirations when it comes to life and career choices. A career that can provide you with a high salary at the entry-level puts you in a better position to repay the student loans.