Applying for Student Loans: Everything You Need to Know and Do
| TBS Staff
Are you ready to discover your college program?
In your search for the perfect school, you'll probably come across some really expensive options. There are affordable options as well, but of course, "affordable" is a relative term when you're figuring out how to pay for college. Even if $20,000 a year is a good deal for your state's public university, that isn't exactly chump change for the average family.
Fortunately, there are a lot of ways to offset this cost, at least while you're in school. The biggest player here is the U.S. government, which hands out an enormous sum of money every year to aspiring students in the form of loans and grants. According to recent reporting, the Department of Education dispersed $125.7 billion to roughly 13 million students in 2016.
This sum doesn't include the additional billions that students borrowed through private lenders on their way to a college or post-graduate education.
So how can you get a sweet slice of that big loan pie? We'll tell you everything you need to know, including, how to:
- Determine Your Eligibility;
- Complete Your FAFSA;
- Pursue State- and College-Specific Aid Options;
- Identify Different Loan Types, and ultimately;
- Determine which loan, or combination of loans, is best for you.
We'll do our best to simplify a process that can be bureaucratic, confusing and even a little scary by laying out the steps you'll need to take and what you can expect along the way.
First things first. Complete your Free Application for Federal Student Aid (FAFSA). Everything starts with your Free Application and frankly, there aren't a lot of things that come without a price tag during this process, so try to make the most of it.
The FAFSA is a form that both current and prospective college students must fill out annually to determine individual eligibility for student financial aid. This means that you'll fill out a FAFSA not just at the start of your college career but for every year thereafter as well, so get to know it.
The FAFSA is made available by the Department of Education. All students seeking assistance for undergraduate or graduate studies have the right to fill it out. In fact, you should complete your FAFSA even if you don't think you'll be eligible for a need-based loan. There are unsubsidized loans which are available to all, regardless of income.
Notable Student Aid Deadlines
You can fill out a FAFSA for the 2017-2018 school year between Oct. 1, 2016 and June 30, 2018. That said, the sooner your complete your FAFSA, the better. Some federal student aid programs have limited funds, and therefore distribute these funds on a first come-first served basis. Get yours while supplies last.
Many states also offer their own financial aid packages. You'll definitely want to explore this option as well. The National Association of Student Financial Aid Administrators (NASFAA) offers a portal that allows you to view state-by-state financial aid opportunities.
You can also check out FAFSA's inventory of state-specific deadlines. Here, you can enter your state of legal residency and the school year for which you are applying to find out about relevant deadlines.
Colleges may also have their own FAFSA submission deadlines for the coming school year. Be sure you keep these deadlines on your calendar as you prepare your financial aid information. Know the cutoff date for your college(s) of choice and be sure to get your FAFSA completed accordingly.
Selecting Colleges To Receive Your FAFSA
You can select to have your FAFSA information submitted to up to 10 colleges or universities. For every college you enter beyond 10, you will need to eliminate one of your original selections. Each college is identified by a Federal School Code. The FAFSA application site provides a Federal School Code Search tool. In addition to providing you with the School Codes you'll need to complete your FAFSA, this tool provides detailed information on selected colleges including tuition, fees, and graduation rates. The tool also allows you to compare information for up to 10 colleges at a time.
For even more detailed information about college costs, graduation data and post-college earnings, check out the College Scorecard, a school-by-school assessment of college performance provided by the Department of Education.
Eligibility for Aid
Before you fill out your FAFSA, you should also be aware of the conditions for eligibility. Your eligibility to receive a loan of any kind is based on the following criteria:
- Maintenance of Satisfactory Academic Progress (SAP);
- U.S. citizenship, or status as a U.S. national or eligible non-citizen;
- A valid Social Security number;
- A high school diploma or GED;
- Certification stating an absence of default status on federal student loans, no money owed on federal student grants, and the promise that all moneys loaned will be spent on education;
- Registration, between the ages of 18 and 25, with the Selective Service System for military conscription for all male applicants; and
- The absence of a guilty plea in the sale of illegal drugs during the period of federal aid receipt.
Forecasting Your Aid Package
Before you prepare your FAFSA, you can take an at-a-glance look at the likely student loan packages available to you. The Office of Federal Student Aid provides an instrument called the FAFSA4caster. Use this to estimate the aid for which you are likely to be eligible. This free calculator can help you plan not just for this year of college but for the years ahead, by projecting the amount of assistance you are likely to receive for the duration of your studies.
Preparing Your FAFSA
Now that you've got the lay of the land, it's time to fill out your FAFSA. Don't sweat it though. We're still here to guide you. Let's start with your filing options:
Options For Filing Your FAFSA
Beginning in the 2017-2018 academic year and going forward, the FAFSA will be made available to the public on October 1st of the preceding year. Stated more clearly, the FAFSA for 2017-2018 was released in October of 2016. The FAFSA for 2018-2019 will be made available in October of 2017, and so on. If you're into boring history trivia, the annual FAFSA release date used to be January 1st. The decision to make the FAFSA available to applicants three months earlier was done to more closely coordinate the timing of the federal financial aid application process with the timing for the typical college admission application process.
But that doesn't really effect you. All you need to know is that you can start the application for the coming school year as early as October 1st.
When you do get started, you will have the option of preparing your FAFSA through any of the following channels:
- Online at fafsa.ed.gov. Log in here.
- By telephone at 1-800-433-3243; or
- By mailing a paper application to:
Federal Student Aid Programs
P.O. Box 7654
London, KY 40742-7654
(This address pertains to the 2017-2018 application. The address may change annually.)
Receiving Your Student Aid Report (SAR)
So now that you've clicked “submit,” or alternately slapped a stamp on your envelope and dropped it in the mail slot, what's next?
Next, you'll receive a Student Aid Report (SAR).
When Will You Receive Your SAR?
Depending on how you submitted your FAFSA, you will receive your SAR either by paper document or electronic mail. The SAR contains a review of the information you provided on your FAFSA as well as some basic information about your eligibility for federal student aid. You should receive an email link to your SAR within a week of submission or, if you elect to receive a hard copy by mail, 1 to 3 weeks.
Naturally, you will receive your SAR faster if you elect to have it sent by electronic mail. If you do elect to receive your SAR by email, the Federal Student Aid office advises that you add the email address FederalStuentAidFAFSA@cpsemail.ed.gov to your contact list so that your SAR doesn't wind up in your SPAM folder.
What's In Your SAR?
Your Student Aid Report will include your Expected Family Contribution (EFC), a legally established formula measuring your family's financial strength based on taxed and untaxed income, assets, and benefits like unemployment or Social Security. Your EFC will display in the upper right-hand corner of your SAR. If your FAFSA was incomplete, your EFC will not appear but your form will provide instructions on what is required of you to resolve the issue.
Your SAR will also include your Data Release Number (DRN). This is also included in the upper right hand corner on your paper SAR. For electronic SARs, the DRN appears in the Application Receipt date box, just below your EFC. This DRN will be necessary if you choose to allow your chosen college to alter information on your FAFSA.
Making Corrections to Your FAFSA
Your SAR also gives you the opportunity to make any necessary corrections to your FAFSA. The first thing you should do when you receive your SAR is review the document for accuracy. If there is any information which is inaccurate or which has changed since your submission, you may log in to fafsa.gov to submit your corrections.
It is important that you do so promptly because the school or schools that you've listed on your FAFSA form will have electronic access to your SAR within a day of its processing. Corrections may be made under the following circumstances:
You made a mistake
You have the ability to correct most factual errors. However, the Office of Federal Student Aid notes that an incorrect Social Security Number usually cannot be corrected. In this case, you'll want to contact the financial aid office of the school you plan to attend to find out if you can correct this error or if you simply must start a brand new FAFSA. Most other errors can be readily corrected through the fafsa.gov page.
Your Situation Has Changed
You can update certain items on your FAFSA in the event that information has changed. This may include a new mailing address, email address, dependency status, marital status, change in the number of family members in a household, or a change in the number of people in your household who are in college. The latter two will typically only require correction when verification is requested by your school's financial aid office.
Some information can't be altered. For instance, it's possible that you wouldn't be permitted to update information regarding changes in your family's savings or income. In the event that there are significant changes to your financial outlook which cannot be corrected or reported on a FAFSA, your best move is to contact your school's financial aid office to seek advice.
You Wish to Add or Delete a School
You may add additional schools to (or remove schools from) your FAFSA even after submission by using the “FAFSA Corrections” option. As with your original filing, you can locate any prospective schools by using the Federal School Code tool provided by the fafsa.gov website.
And once again, you may include up to 10 schools at once. For every college you enter beyond ten, you will need to eliminate one of your original selections.
Filing Your Corrections
If you have corrections to make that fall under any of the preceding three categories, follow the instructions here below to file your corrections:
- Login at fafsa.gov
- Click “Make FAFSA Corrections”
- Enter your FSA ID (which you should have created during the application process)
- Change Your Information
- Submit Your Information
If you wish to make corrections and you've elected to receive a paper copy of your SAR, write your corrections and updates directly on the document, sign it, and mail it to the address provided.
Your school of choice might also be able to make changes to your FAFSA. If you have already selected to attend a specific college, you might be able to contact the financial aid office for assistance in correcting or updating information.
Common Grant and Loan Types
Ok, by now, you've probably read “FAFSA” so many times that the word has lost all meaning. I can't promise you it's the last time we'll mention it. (Actually, I can pretty much guarantee it won't be). But at least you're done filling it out. Now we can move on to the subject of grants and loans.
To review, your SAR will indicate your Expected Family Contribution (EFC). Your EFC determines the grants or loans for which you are eligible. Eligibility for certain common grant and loan types will vary depending upon your needs, qualifications, and expenses.
The Pell Grant is awarded to students with demonstrated financial need. The Pell Grant is an award with a maximum amount of $5,815, (though it bears noting that the number does increase every few years depending on legislation and federal budgetary allocation). If you have already earned a bachelor's degree, you are likely not eligible for a Pell Grant, though exceptions may apply to some baccalaureate programs. Technically, the Pell Grant is not a loan as the recipient is not responsible for paying back the borrowed sum. Your EFC will determine whether or not you are eligible for this grant. After completing your FAFSA, you will receive emailed or written notification indicating whether or not you are eligible for a Pell Grant.
The Stafford Loan is a Federal Direct loan with a fixed interest rate of 4.29% (as of the 2015-2016 academic year). The Stafford is available in both subsidized and unsubsidized forms. For subsidized loans, which are granted on the basis of financial need, the interest on the loan is paid by the federal government as long as the student is enrolled in college at least half-time. The borrower becomes responsible for repayment of interest upon leaving or completing his or her studies. For unsubsidized loans, the interest amount accrues while the student is enrolled, and must be repaid along with the principal loan balance after a student leaves school, graduates, or drops below half-time enrollment. There are several options for how to structure the repayment process which may include some deferment period (typically a grace period of six months following departure from school).
Federal Perkins Loan
Similar to the Stafford Loan in most regards, the primary difference is that the Federal Perkins Loan is lent directly by Title IV-eligible schools (as opposed to the Federal Government) and must be repaid at a fixed interest rate of 5%. It also bears noting that because financial eligibility requirements for Perkins loans vary from school to school, your eligibility for this type of loan won't be determined until you receive your financial aid package from your specific school of choice.
Federal Supplemental Educational Opportunity Grant (FSEOG)
The Federal Supplemental Educational Opportunity Grant (FSEOG), like the Pell Grant, is awarded on the basis of financial need and repayment is not required. However, like the Perkins Loan, this is one that you must apply for directly though the financial aid office of the university you plan to attend. The FSEOG is reserved for those students with the greatest level of financial need and the disbursement amount will depend on the depth of that need. The amount may vary between $100 and $4000.
Federal Work-Study Program
The Federal Work-Study Program gives eligible students an opportunity to do part-time, on-campus work to help offset the cost of tuition. Typically, half of the student's wage will by paid by the federal government while the other half is funded by the school itself. Every college has a different set of working opportunities from which applicants can choose. Consult your colleges of choice to learn more about such opportunities.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is distinct among federal student grants because it requires you to take a specific set of classes to get your grant and it subsequently requires you to keep a certain type of job in order to prevent the grant from turning into a loan. As long as you adhere to the courses and career path specified, the TEACH Grant need not be repaid. The maximum TEACH Grant award is $4000 and you must sign a TEACH Grant Agreement to Serve which indicates your committment to teach in a high-need field, at a low-income school and for at least four academic years within eight years of completing or ceasing enrollment in the course of study for which you received your grant.
The Service Grant is specifically intended for those applicants who are not financially eligible for a Pell Grant but who lost a parent or guardian to military combat in Iraq or Afghanistan following the 9/11 terrorist attacks. You must have been under 24 years old or enrolled in college at least part-time at the time of your parent or guardian's death to be eligible. The maximum Service Grant award typically mirrors the Pell Grant. This means that, at the time of writing, the maximum Service Grant award would be in the amount of $5,815. This number will fluctuate in direct correspondence to changes in the maximum Pell Grant amount.
The PLUS Loan is a student loan granted to the parent of the enrolled student. The PLUS Loan has some similarities to the Stafford or Federal Perkins Loan, including its repayment schedule, which usually begins roughly six months after the completion or cessation of one's studies. (Note: This only applies to loans granted after 2008. Repayment for PLUS Loans from prior to 2008 must begin within 60 days of final disbursement). By contrast to Stafford and Perkins Loans, the PLUS Loan is granted with a fixed 7.9% interest rate. Also of note, the granting of such loans is subject to credit review, which is not the case for Stafford loans. You can apply for a PLUS Loan directly here.Consolidation Loans
Under the terms of the Federal Direct Student Loan Program, a borrower may consolidate Stafford Loans, PLUS Loans and Federal Perkins Loans into a single debt, reducing monthly payments and applying a single fixed interest rate to one lump sum. If possible, consolidation is always advisable as it can reduce the complexity of the repayment process and, ultimately, reduce the long-term cost of repayment.
You may also have the option of refinancing your loans through a private lender. While this can be a good way to secure a favorable interest rate or improve the terms of your repayment process, this is an area where you really must proceed with caution. Some private lenders have been know to engage in predatory practices. If you've done any research on student loans at all, your social media pages have probably been infiltrated with pop-up ads hawking all kinds of loan refinance deals. Should you decide to refinance, deal only with reputable lenders. Check out our list of the 10 Best Student Loan Refinance Deals for more.
Supplementing With Private Loans
Typically used to supplement standard aid loans like a Pell Grant or Stafford Loan, a private loan generally lacks many of the protections that come with those provided through the federal government. These commercially advertised loans may sometimes (though not always) lack forbearance, deferment and financial hardship protections and there is no ceiling to interest charges, meaning the cost of repayment will often be higher. If you do need to supplement your federal or state loans with some private assistance, it's a good idea to shop around for the loan that suits your needs best.
According to simpletuition.com, the following are the 10 largest student lenders so this is probably a good place to start your search:
- Social Finance, Inc
- Sallie Mae
- Citizens Bank
- Wells Fargo
Congratulations! You've completed the loan application process. Now all you have to do is graduate college, find a good job and pay back your loan. No pressure!
But again, don't sweat it. We're here to help you every step of the way. Now that you know everything you need to about applying for your loan, learn about the risks and how you can avoid some of the most common pitfalls.
For more about these pitfalls and about financial aid in general, visit our comprehensive Student Financial Aid One-Stop Source.
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