Student Loans

A student loan is money that is borrowed from the government or a private institution to help you pay for college. They are different from scholarships and grants, as you will eventually have to pay back student loans. On the other hand, loans are not distributed based on merit such as academics, athletics, or music. They are distributed based on a combination of your credit score and financial need. Student loans can cover your tuition, room and board, books, and sometimes additional spending money to put towards cost of living and other academic expenses.

There are two main types of loans. There are federal loans and private loans. The advantage of federal loans is that your repayment plan is based on cost of attendance and your salary or family’s income, allowing for a more feasible monthly payment. Second, you don’t need a credit history to apply for them and because of this you don’t need a cosigner to apply for federal loans. Many first time borrowers tend to choose federal loans because the interest rates are often lower than private loans and some may even offer loan forgiveness.

Private student loans are offered by banks, credit unions, or even online lenders. Interest rates vary from lender to lender, whereas federal loans rates are fixed. You do not need to complete a FAFSA to apply for a private loan, but instead you must pass a credit check. You apply directly with the lender, either online or in person and then they will provide you with a variety of options based on your specific needs.

Aside from having decent credit, there are other common requirements for a private student loan. You must meet the age, citizenship and education requirements. You must meet both income and credit criteria. You're only allowed to use the money specifically for educational expenses. And lastly, you need a creditworthy cosigner. But there are some benefits to private loans. While a cosigner is required, having one may actually increase your chances of approval and get you a better interest rate. You can earn even further discounts on interest rates if your credit is good enough. Since private loans are not based on your financial needs, it is possible to get a higher loan amount. Students mostly take out private loans once they have maxed out federal student loans and need additional financing options. But if you know you have excellent credit already, it may be worthwhile looking into a private loan first.

To learn more about your specific student loans and what you qualify for, please visit The Office of Financial Aid.