10 Key Steps to Help You Qualify

You might wonder what the requirements are to qualify for student loans? Don’t worry, we have your back. We’ll help guide you through the whole process.

To qualify for federal student loans, you must have at least a United States citizen or legal permanent resident. To qualify for private student loans, you must have decent credit, income, and more.

Notwithstanding, in this post, we will properly take you through a step by step process on how to qualify for student loans in 2020, starting from the steps to take before applying for student loans and how to apply.

Here is an overview of what to expect:

What are the steps to take before applying for student loans?

The student loan application process is relatively complex, especially if you plan to apply for federal and private loans. Allocating time to apply for free aid and estimating the net cost of your school can help make sure you’re not borrowing more than you need.

However, you’ll also need to figure out approximately how much you’ll need to borrow before applying for student loans. Follow these steps to get started:

Step 1: Apply to different schools

It may seem obvious, but you’ll need to have an idea of where you’ll be going before you take out any loans. You won’t know how much you need to borrow until you’ve nailed down a school. And most private lenders require you to select the school you plan on attending when you complete the application.

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Step 2: Look for scholarships and grants

Scholarships and grants offer free money for school, so apply for these before you start searching for student loans. Many schools offer institutional scholarships and grants you’re automatically considered for when you apply. You can also apply for free aid from local and national organizations. If you’re still in high school, your guidance counselor might be a good resource to find scholarships you qualify for.

Step 3: Understand your school’s cost of attendance

How much you have to borrow will depend on your school’s cost of attendance (COA), which includes tuition, fees, room and board, books, and other personal expenses. You can usually find this on the school’s financial aid website.

Step 4: Determine how much you might need to borrow

Once you know your school’s COA, subtract all of the financial aid you plan on receiving to get an idea of how much you’ll have to borrow in student loans.

Step 5: Talk to potential cosigners

Depending on the type of student loans you end up applying for, you might need to bring on a cosigner to help you qualify. This is especially the case with private student loans. These come with credit and income requirements that can be difficult to meet straight out of high school. Talk to family members or friends to see if any would be willing to cosign your loan.

Steps to apply for a student loan

Applying for student loans is a complex process, and it generally can’t be done in one sitting. Follow these steps to get started:

Step 1: Fill out the FAFSA

To qualify for any type of federal aid, including federal loans and grants, you’ll need to fill out the FAFSA on the Federal Student Aid (FSA) website. The information you submit is also used to determine how much funding you qualify for. The funding comes from your school and state government.

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Step 2: Review your financial aid award letters

Your financial aid award letter will outline the school’s COA and any aid you’ve received from your school. These also include the state and the federal government. This might include scholarships, grants, student loans, work-study, or assistantships.

Step 3: Accept your federal loans

After you’ve decided on a college, reach out to the school’s financial aid office for instructions on how to accept your award letter and any federal student loans you wish to take out. You’ll then be sent your loan documents and a master promissory note to sign.

Step 4: Compare private student loans

If you don’t qualify for enough federal student loans and other financial aid to cover the full COA, it’s time to compare your private student loan options. These typically come with higher rates and less-flexible repayment plans than federal loans, which is why they’re best saved for last.

When comparing lenders, you’ll want to look at eligibility requirements as well as rates, fees and terms of each provider. You might also want to consider whether they offer cosigner release, forbearance, deferment or other perks to help jumpstart your career.

Step 5: Fill out the application

Once you’ve found a lender that works for your financial situation, it’s time to begin the application. Most allow you to apply online by filling out a form with information about yourself, your school, your finances, and your cosigner’s finances if applicable. Make sure to double-check all of the information you entered is correct before submitting the application.

Step 6: Review and sign your loan documents

If you’re approved, it’s time to review your loan agreement. It should list your APR, loan term, and potential fees as well as your repayment options and any deferment or forbearance programs you may be eligible for graduating.

Have a cosigner? Ask them to review your loan documents as well. This way, you’ll have two eyes checking over to make sure everything looks good. If you agree to the terms, sign the documents and return them to your lender to accept the loan.

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Here’s how to qualify for a student loan:

What are the Federal student loan requirements?

If you’ve maxed your scholarship and grant options (or don’t qualify), federal student loans are a good alternative to pay for college. Here are the main requirements for these loans:

  • Demonstrate financial need: Financial need is calculated when you complete the FAFSA and is required to qualify for Direct Subsidized Loans. Financial need isn’t required to qualify for Direct Unsubsidized Loans.
  • Be a U.S. citizen or eligible noncitizen: Some legal U.S. residents without citizenship might still qualify.
  • Have a Social Security number: Outside of residents from a few U.S. territories, you must have a valid Social Security number.
  • Enroll in an eligible degree or certificate program: You can’t use federal student loans unless you’re attending an accredited or recognized program.
  • Make satisfactory academic progress: Each school sets its own academic standards. If you don’t maintain the minimum grades your school requires, you risk getting cut off from federal aid programs.
  • Register with Selective Service: Men between ages 18 and 25 must sign up for the draft through Selective Service.
  • Enroll at least half time for Federal Direct Loans: For most student loan programs, you must sign up for at least a half-time course load.
  • Complete and sign the FAFSA: The Free Application for Federal Student Aid (FAFSA) is used to calculate your financial need, which is the difference between what your family is expected to contribute and your estimated cost of attendance.
  • Have the qualifications needed for your program: A high school diploma, GED, a homeschool program, or equivalent is required.

What to do if you don’t meet federal requirements

If you are not eligible for federal student loans, don’t think you’re not lucky. There are other ways to pay for your education.

First, make sure that you apply for all possible scholarships and grants. You do not have to pay these back, so they’re like free money for school. You can also contact the financial aid office at your school for advice on your specific situation.

Once these options are exhausted and any other government loan programs, private student loans may be a good option for exploration.

Private student loan requirements

Unlike federal loans, there isn’t just one set of private student loan requirements. Instead, each lender has its own rules. Here are some common requirements to qualify for these loans:

  • Enroll in an eligible program: You can’t use private student loans if you aren’t a student, and you must be enrolled in an eligible program.
  • Meet demographic requirements: Most lenders require you to be a U.S. citizen or legal resident with a Social Security number, be at least 18 years old, and hold a high school diploma or equivalent.
  • Use the loan for education purposes: Lenders won’t watch where you spend every dollar. But you should generally use your loans only for school expenses since you have to pay everything back, including any extra funds left over after paying tuition, fees, and other direct costs.
  • Have a good credit history: Unlike federal loans, private loans require a credit check. A low credit score, history of late payments, or bankruptcy could stop you from getting a student loan without a cosigner. But if you find a cosigner with a good credit history, you’re in good shape.
  • Have an income: Lenders will review your income and debt-to-income ratio to determine if you’re able to repay what you borrow.
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Most of these requirements are firm, but in some cases, you can get around the minimum credit or income history if you can find a cosigner with good credit who qualifies. Over 93% of student loans are taken out with a cosigner, so it’s actually a good idea to consider one even if you can qualify without. A cosigner can even help get you a lower rate.

FAQs:

What happens after I’ve signed my student loan documents?

The federal government or your private lender will send the funds directly to your school. Once your tuition, fees, and room and board are paid for, your school will issue you a student loan refund check for any remaining funds.

Reasons why you might have been rejected?

Here are a few reasons why your private student loan application might have been rejected:
1. You exceeded your school’s COA. Due to federal regulations, you can only borrow up to 100% of your school’s COA. Double-check how much you need to cover with student loans and try resubmitting your application for a lower amount.
2. You have no one to cosign. If you haven’t had time to build up your credit history — or don’t have a steady source of income, you’ll have a hard time qualifying for a student loan without a creditworthy cosigner.
3. You made mistakes on your application. If you entered anything incorrectly on your application, ask if you can resubmit it with the correct details.

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What are the alternatives to taking out a student loan?

These four alternatives can reduce the amount you need to borrow, easing the burden of student loan debt after you graduate.
1. Scholarships and grants. On top of the scholarships and grants offered by your school and government agencies, you can also find opportunities for free aid from private organizations. And look into smaller scholarships, a few hundred dollars here and there can quickly add up.
2. Part-time job. A part-time job may not be ideal if you’re a full-time student, but it can supplement your day-to-day spending so you don’t have to borrow as much to cover smaller expenses.
3. Income share agreements. Schools and lenders are starting to offer income share agreements as an alternative to student loans. Rather than pay interest, you promise to pay a percentage of your income for a few years after you graduate.
4. Crowdfunding. If you have a large social network or generous family members, you might want to look into crowdfunding a portion of your college expenses. When creating your campaign, adding information about your career goals and volunteer experience might entice more people to contribute.

Conclusion

Exhausting your free aid options and estimating your school net cost are key steps to take before applying for student loans. Then, once you know how much you’ll need to borrow, start applying for federal loans through FAFSA before resorting to private lenders.

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