If you require financial assistance for college and did not receive sufficient funds through scholarships or work-study programs, you may need to take out a student loan to cover the costs of school. Obtaining a student loan is a relatively simple process. You’ll apply for the loan through a federal or private lender and then await disbursement of the funds to your school.
Obtaining federal or private student loans can take several weeks or months — though private student loans may be the more expedient option if you require funds immediately.
If you’re considering financial aid to assist with the costs of your education, you may be wondering how long it takes to obtain a student loan. The entire process — loan application, approval, and disbursement — is different depending on whether you receive a federal or private student loan. However, knowing the approximate timeline will assist you in determining when to apply for student loans.
Is Obtaining Student Loans Too Simple?
It is not difficult to obtain a student loan — if they were, they would not be the largest category of outstanding consumer debt in the United States (except for mortgages).
A significant factor? For federal student loans (which account for a sizable portion of the $1.3 trillion in current student loan debt in the United States), little is done to verify borrowers’ ability to repay. Indeed, repayment ability has little to do with student loans, which are notoriously difficult to discharge in bankruptcy. While this provides significant comfort to lenders, consumers are unlikely to see it that way. While someone whose student debt exceeds their income should have known better before taking out the loan, it can be frustrating to be offered money you cannot afford to repay.
Simple Steps to Obtaining a Student Loan
Consider the Long-Term Consequences of Your Decision
It cannot be overstated how significant the decision to take on student loans is. While you almost certainly already know this, it bears repeating. Depending on the number of student loans – particularly private loans – required for at least four years of education, you may find yourself saddled with decades of loan payments. And that is before interest is added.
As a result, a sobering reality check is required. In the United States, student loan debt exceeds $1.5 trillion, and the most expensive universities do not appear to be lowering tuition in the near (or distant) future. As a result, you’ll need to assess your family’s financial situation. Is there a reliable source of income in the foreseeable future to support a large amount of debt?
Additionally, the student’s unique circumstances come into play. What are their academic standings? For how many years of education are they requesting loans? Have they been accumulating funds on their own through a part-time job? And how does family income affect the types of loans you can obtain?
While the answers to these questions may result in an abundance of available funds and a decreased need for loans, they may also restrict the number of federal loans available, necessitating the use of private loans. This can have an effect on not only the loan situation but also on the school selection process. If you’re required to take out numerous private loans in order to attend a more expensive private school, it might be time to consider a nearby public university.
Apply for Grants and Scholarships to Help You Reduce Your Reliance on Loans
If you qualify for grants and scholarships, they can significantly reduce your reliance on student loans for education.
Grants and scholarships are available to all types of aspiring students. There are grants available to assist you in repaying some of your student debt if you maintain a certain grade point average throughout your education, major in a specific field, or earn a certain income. Similarly, there are scholarships available for a variety of college programmes and majors, as well as for women and students of colour, that may help cover a portion of your tuition.
Conduct research, and conduct it early, to ensure that you are aware of the deadlines for applying to the scholarships in which you are most interested and that they apply to you.
Complete and Submit the FAFSA
Certain grants, such as the Pell Grant, are awarded (if you are eligible) upon completion and submission of the Free Application for Federal Student Aid, or FAFSA. The FAFSA is required if you wish to receive federal financial aid for your education, and the current deadline is June 30, 2019 for the 2018-19 school year. June 30, 2020, is the deadline for the following school year.
Filling out the FAFSA entails providing detailed financial and tax information about you and your family, which is used to determine your general income and tax bracket. They can then determine how much of the available funds they can and will devote to your federal student loans based on this information.
The FAFSA, in particular, should be prioritised. The sooner you submit it, the more funds you will have available. If you require more financial aid than others, submitting your application early increases your chances of receiving a sizable amount.
Even if you have already enrolled in college and completed one year, you must renew the FAFSA each year. While the initial FAFSA submission can be lengthy and cumbersome, the renewal process is significantly faster. As long as you have your log-in information handy, all you need to do is verify that all of the previous year’s information is correct/update it as necessary, and enter any new tax information.
Analyze Your Federal Loan Alternatives
If you submit your FAFSA on time and demonstrate a need for financial aid for education, you will almost certainly be offered a federal loan.
These government loans should be your first choice. They are far superior to private loans in one significant way: federal loans typically have lower interest rates than private loans. Interest on loans is a significant factor in why repayment can take so long for college graduates.
Naturally, the amount of money available through federal loans is limited. However, with these, make do with what you can get.
Utilize Available Subsidized and Unsubsidized Loans
Federal loans come in a variety of flavours, with the two most significant distinctions being subsidised and unsubsidized loans.
Direct subsidised loans are available to students whose FAFSA indicates they require financial assistance to pay for college; the school you attend determines the maximum amount you can borrow, as long as it does not exceed your financial need. The Department of Education will also pay the interest on subsidised loans during specified periods (during school if you are enrolled at least part-time, the first six months after graduation, or during an approved period of deferment). They are restricted to undergraduate students.
Direct unsubsidized loans, on the other hand, are available to undergraduate and graduate students alike and do not require that you have a specific financial need. However, you are responsible for paying all interest on them, and interest will continue to accrue even if your payments have been paused. However, similar to subsidized loans, the amount you are eligible for is determined by your school.
The maximum amount of subsidized and unsubsidized loans that you can receive is determined by your status as a dependent or independent student and your academic year.
If Necessary, Apply for Private Loans
When applying for financial aid for college, the hope is that you will not end up having to borrow an excessive amount. Ideally, you’ve saved a significant amount for this moment and can supplement it with grants and scholarships, minimizing your reliance on student loans.
However, as tuition continues to rise, this is not always a feasible option for prospective students. It is possible that you will require additional private loans to cover tuition costs. Private loans may be more difficult to obtain. Your credit score, among other things, will be considered when determining whether you qualify for a loan and the amount offered.
Exercise extreme caution when it comes to private loans. Conduct extensive research on private lenders to ensure they are reputable. Contrast the interest rates being offered to you with the average rate on a loan. And, if possible, avoid becoming overly reliant on these private loans to finance your education.