Understanding Federal and Private Student Loan Applications

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When you’re planning for college, one of the biggest challenges is likely how to pay for your education. If you’re lucky, you may have scholarships or grants to help cover the cost of tuition, room and board, and other related expenses. However, if you’re like a lot of college students, you may find yourself needing to borrow money through student loans to help pay for your remaining college expenses. Investing in yourself and your education opens up opportunities for your future, but remember, the student loans used to help pay for school will need to be repaid.

If you need a student loan to help finance your education, it’s important to know what options are available and how the application process works. You should first explore your options for federal student loans. The primary federal loans available to you will be Direct Subsidized and Direct Unsubsidized Loans. In order to qualify for these loans, you need to have completed the Free Application for Federal Student Aid (FAFSA). The FAFSA is used to determine your eligibility for all federal financial aid programs, including Pell Grants.

After you’ve completed the FAFSA, your college financial aid office will provide you with an award letter telling you which programs you are qualified to receive. Read our article for tips on how to read your financial aid award letter. If you decide to borrow through a federal loan program, your school will instruct you on the steps needed to apply. You’ll complete your loan application and sign your promissory note at StudentLoans.gov, and complete the entire process online. A credit check is not required for you to receive a Direct Subsidized or Direct Unsubsidized Loan. However, a parent or graduate student applying for a Direct PLUS loan will need to submit to a credit check. If you’re a first-time borrower, you may be required to complete an entrance counseling session (usually this is completed online) before you can receive your loan funds. Typically, your loan will be equally disbursed across the academic term(s) for which you are applying. For instance, if you requested a loan to cover your costs for both the fall and spring semesters, you’ll receive half in the fall and half in the spring.

Students frequently find they need to borrow additional funds after they’ve exhausted federal student loans and other sources of aid. Students may need additional assistance in the form of a private student loan. Unlike federal student loans, which are funded by the government, private loans are made by banks, credit unions, and other similar organizations. To apply for a private loan, visit the loan provider’s website and apply online directly at their application site. For U-fi’s lender partners, you can apply directly from the U-fi website. Unlike a federal loan, you don’t need to complete the FAFSA in order to apply for a private loan; however, it’s still best to complete the FAFSA and explore all of your financial aid options fully before applying for a private loan.

Keep in mind that with a private loan, you are required to have good credit and often a minimum level of income. Many students need a cosigner for their private loan. A cosigner shares equal responsibility for the repayment of the loan, and agrees to pay back the loan if you do not. A cosigner doesn’t have to be related to you, but many borrowers ask a parent, relative, or spouse to be the cosigner for a private loan. A cosigner often helps you receive a better interest rate on your loan. Learn more about cosigners in our article.

Once you’ve been approved for a private loan, your college financial aid office will typically have to certify the loan amount with your lender and establish dates for the funds to be sent to your school. Although it’s a private loan, the funds are still sent directly to your college. This allows you to use the funds to pay remaining charges to your school. Any remaining balance from your private loan funds is then paid directly to you.

As always, limit your borrowing to only what you need and can reasonably afford to repay. For additional information on the loan process and differences in federal and private loans, visit our website.

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