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- You'll apply for a federal loan with the FAFSA, and a private loan on the lender's website.
- The FAFSA takes about an hour to complete, while private applications can just a few minutes.
- You'll need a credit check to get a private loan and to get a Direct PLUS Loan from the government.
If you need help paying for college and didn't receive enough money through scholarships or work-study programs, you may need to take out a student loan to cover the costs of school.
Getting a student loan is a fairly straightforward process. You'll apply for the loan through a federal or private lender, then wait for the funds to be disbursed to your school.
Step 1: Start with the FAFSA
The FAFSA is the key to obtaining federal aid. FAFSA — which stands for Free Application for Federal Student Aid — determines one's eligibility for loans, grants, and work-study.
To get started, create your FSA ID, which is essentially your electronic signature for the FAFSA. Parents of dependent students also need an FSA ID. From there, check federal and state deadlines. And remember: Applying early is best!
You won't need a credit check with federal loans, with the exception of a Direct PLUS Loan, which is lent to the parents of undergraduate students or to professional and graduate students. This loan is not based on financial need and has a higher interest rate than subsidized or unsubsidized loans.
Step 2: Understand your financial aid award letter
Each school that you've been accepted to will send out a financial award letter detailing the aid package being offered. It will include grants, scholarships, work-study details, and federal student loans (subsidized and/or unsubsidized). After reading through your letter, decide which package makes the most sense for your situation. You don't have to accept the full loan amount offered.
If you have the option, you'll want to take out a subsidized loan over an unsubsidized loan. Subsidized loans are made based on financial need, and the government pays the interest on your loan while you're in school. Financial need doesn't factor into unsubsidized loans, and interest begins to accrue immediately.
Step 3: Complete additional paperwork (if required)
Once you've decided on a financial aid package, fill out any required paperwork and keep all your documents in a safe place. From there, sign up for any online sessions explaining your borrower responsibilities.
You'll also need to sign a Master Promissory Note if you choose to take out a loan. An MPN is a legal document you sign to promise to pay back your loan along with interest and fees. You'll also determine the amount of money you want to borrow and your repayment term. The government won't disburse your loan until you sign this document.
You can generally expect your school to get your federal funds about 10 days before classes begin. You may experience a 30-day delay if you are both a first-year student and a first-time borrower.
What about private student loans?
Private student loans often come with higher interest rates and fewer protections for borrowers than federal student loans, but you may need to take them out if your federal options don't cover the cost of your school.
You can find different applications for private student loans on lenders' websites. You'll probably need to provide similar financial and identification documents as you would on the FAFSA, though the requirements will vary by lender.
Private lenders will run a credit check to figure out if you qualify for a loan, much like the federal government does with Direct PLUS Loans. Discuss details with your particular lender.
You can apply for a private student loan much more quickly than a federal student loan. You could get your rates and see whether you're approved for a loan within a few minutes with some businesses, and most companies will give you an approval decision within 15 minutes.
If you want to know the status of your loan disbursem*nt, you can usually check a lender's online portal or call customer service. You'll need to agree to terms similar to those in an MPN and sign a binding document.
Once you officially accept the loan, your college will likely get funds from a private lender within two to 10 weeks. You'll get the funds in your personal bank account if you take out a direct-to-consumer loan, while your school's financial aid office will get the money if you take out a school-certified loan.
FAQs
Can I apply for student loans before being accepted to college?
You can fill out the FAFSA before being accepted, but you'll need to add schools later to actually receive award letters.
How long does it take to get the student loan money?
Schools will usually disburse loans at the start of each semester, but timing can vary.
Where can I get help with the application process?
To get help with the application process, visit your school's financial aid office, the Federal Student Aid website, or your high school counselor.
Loans Reporter
Ryan Wangman was a reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. He is also a Certified Educator in Personal Finance (CEPF).In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe.
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