The What, Why & How of Student Loans
It’s no secret that college tuition is expensive. And while there are lots of strategies to pay for college, one of the most popular ways is to take out a student loan. But before you do that, it’s important to understand the what, why, and how of student loans.
So The What: What Are Student Loans?
In short, student loans are money borrowed from lenders such as banks or the government that students can use to finance their education.
These loans typically come from the federal government or private lenders and cover tuition and other educational expenses like room and board, textbooks, etc. They are typically interest-free until after graduation, making them a great way to pay for college while avoiding hefty upfront costs.
Student loans provide access to higher education for those who may not have been able to afford it otherwise. It’s important to remember that taking out a student loan isn’t always necessary — it’s just an option if you need help paying for school.
Step 1: Determine Your Eligibility
The first step in the process of getting a student loan is to determine your eligibility. You should contact your school’s financial aid office to find out what kind of loans they offer and whether or not you qualify for them. Generally speaking, most students will be eligible for federal loans and/or private student loans.
- all applicants must be US citizens or eligible non-citizens with valid Social Security numbers (SSN).
- Non-citizens who do not have an SSN may still apply for a loan if they provide documentation of their permanent residency status or eligibility under certain immigration laws.
- all applicants must be accepted or enrolled in an eligible degree or certificate program at an accredited college or university in the United States
- Must maintain satisfactory academic progress while enrolled in school.
- In addition, borrowers must agree to use the money received from their loan only for educational expenses such as tuition, fees, books, supplies, room and board, living expenses while attending school full time etc.
Step 2: Complete The FAFSA
The next step is to complete the Free Application for Federal Student Aid (FAFSA). This form must be completed each year that you wish to receive financial aid. The FAFSA will collect information on your family’s income, assets, and other factors that determine how much financial aid you are eligible for. Once completed, your school will use this information to determine which type of loan(s) and amount(s) they can offer you.
Step 3: Compare Your Options
Once your FAFSA form has been processed, it’s important to compare different lenders before committing to one option over another. Different lenders may offer different interest rates and repayment terms so it pays off to shop around before settling on one specific lender.
Step 4: Gather Required Documents
Once you have determined that you are eligible for a student loan, the next step is to gather all of the required documents needed for your application process. These documents typically include proof of income, bank statements, tax returns, educational transcripts, and identification documents such as a driver’s license or passport
Step 5 – Apply For Loans
Once you know which type of loan(s) and amount(s) are available, it’s time to apply! Make sure that all documents are filled out correctly before submitting them as any mistakes could delay the approval process significantly. If approved, the funds will then be disbursed directly into your bank account or sent directly to your school depending on the lender’s policy.
Now you know the what, why, and how of student loans, let’s get deeper in the next module