Step-by-Step Guide to Applying for a Private Student Loan
The Consumer Financial Protection Bureau suggests that about 67 percent of students who earned a bachelor’s degree in 2010 used some form of student loan in order to cover the cost of that education. But even though borrowing money is a common part of the student experience, few classes are taught on the subject, and few students talk openly about the steps they must follow in order to get help.
Students who have never applied for a private loan might have a number of misconceptions about how the process works, and they might even believe that getting a loan is a long and painful process that they won’t have time for. In reality, getting a loan from a private lender is remarkably painless, as long as students follow a few basic guidelines and complete each necessary step with care.
Pulling Together Information
Private lenders want to know a significant amount of information about the people who want to tap into their sources of money.
- Social Security Numbers
- Telephone numbers
- Income levels
- Value of any assets
Students are also required to outline how much money they’ll need to borrow. Determining the cost of tuition and adding in fees for books and expenses can seem difficult, but often, students who enter the private marketplace for loans have already completed the Free Application for Federal Student Aid (FAFSA), and they’ve been given a formal response from the school that outlines how much the student is expected to contribute on a yearly basis. That letter should contain all the financial data the student needs.
Completing the Form
Most student loan documents are available in online formats. Students can simply move from screen to screen, filling out each box with the information that pertains to them. Students must be sure to be honest as they complete these forms, as they can be prosecuted for any willful distortions of data.
Once that form is complete, officials look over the data and determine how much the student might qualify for, and how risky that loan might be. Then, if the student’s application is approved, officials provide a document in which the terms of the loan are spelled out. It’s vital for students to look over these documents carefully. All of the costs associated with the loan, including costs attributed to interest payments, are spelled out in the loan documents. Students should be sure that they understand what they’re being asked to pay.
If the terms are agreeable, however, students can simply sign the loan documents. The funds will be distributed through the school, in most cases, so students can check with the financial aid office of their schools to ensure that everything happened properly.
- Have everything ready when you sit down to apply.
Some of the information you will need for your federal and/or private student loan applications may not be readily available:
- The amount of your monthly rent or house payment
- Your gross annual income and other tax-filing info. Keep your latest tax return on hand.
- Contact information for references — name, address, phone number
- Social security number, contact and employment information, and tax return info for your co-signer
- Keep your co-signer handy.
If you are applying for a private student loan, remember that a co-signer is almost always recommended.
- Remember to pay close attention to total cost of the loan.
Each $1 borrowed today can become much more once interest is compounded.
- Run the numbers before you apply.
Figure out exactly how much you need to borrow before you go online to apply.
How does the loan application process work?
After selecting the lender of your choice at SimpleTuition, click through to the lender’s site to begin an application. The approval and processing of applications varies greatly from lender to lender so it is hard to put a time-line to it. However, some lenders offer e-signature, which will allow you to complete the process online and receive your funds faster. Some banks will send or express mail the necessary documents to you to complete the student loan.
As of February 14, 2010, a new form is required before a private loan can be disbursed. In compliance with the Federal Reserve and Department of Education rules and regulations, students who borrow private loans are required to complete the Private Loan Self-Certification Form for each loan. This form is available at your financial aid office or directly from the Department of Education. As with federal student loans, you will be required to sign (or e-sign) a promissory note for each private loan whereby you agree to accept the terms of the loan (rate/fee/APR/repayment) and then repay it.
Is it necessary to fill out the FAFSA in order to apply for college loan?
FAFSA forms are necessary to apply for federal aid such as grants, loans, and state scholarships. Every student should submit a FAFSA when considering aid options. You may obtain this application online at fafsa.ed.gov. The form is used to determine how much aid you are eligible for and how much you will receive.
Do I need to apply for a college loan to cover the cost of my education?
A large majority of students in the United States need to apply for a college loan in order to cover the cost of their education. College loans are offered by both the federal government and private lenders such as banks and financial institutions. In order to apply for federal loans, students must fill out the FAFSA application form. This will help students access Perkins and Direct loans, providing students with fixed interest rates and some repayment protection.
Should I for apply for student loans if I don’t have the financial means to pay for education?
You should at least consider applying for student loans, but only if you have no other way to pay for your education. Use federal loans, scholarships, and institutional financial aid before you borrow private student loans. While student loans are specifically designed for students in need, they can be expensive, especially private loans. As we mentioned, use federal student loans first. The application process for federal loans is simple and convenient. All you have to do is fill out a FAFSA application and submit it online at fafsa.ed.gov.