If you don’t get enough scholarships, grants,
and money from the Tooth Fairy to pay your way through school,
consider getting a student loan. There are two types of loans:
federal and private. Federal loan money comes from the government;
money comes from banks.
You’re eligible for a federal student loan
as long as you’re:
* A U.S. citizen,
* Attending an accredited school,
* Enrolled in at least six credit hours, and
* Haven’t defaulted on a student loan before.
You don’t have to make a certain amount
of money or prove that you’re needy to get a federal loan,
though your financial need can determine if you get a subsidized
or unsubsidized loan.
How to apply
“File your Free Application for Federal Student Aid, then
contact your school’s financial aid office for specific
processing steps to apply” to apply for a federal loan,
says Leigh M. Fiorenzo,
assistant vice president of Educational Lending for M&T Bank
After you send in the FAFSA (fafsa.ed.gov,) you’ll
receive a Student Aid Report (SAR) to confirm your info. Then
expect to hear from your college regarding your financial aid
You don’t have to accept all—or any—of the loans
that you’re awarded. Just make sure you follow your school’s
directions for declining. Before your award is disbursed, you’ll
have to sign a Master Promissory Note, which shows you understand
how you’ll pay the loan back.
How to pay it back
Once you graduate or drop below half-time enrollment (six credit
hours), you’ll begin repayment within six months.
“For the subsidized loan, the interest is
paid for by the government until the student goes into repayment,”
says Fiorenzo. “For the unsubsidized loan, the interest
begins to accrue immediately, but the student can defer the interest
payment until they actually go into repayment. It is recommended
that the student pay the interest while in school if they are
“Unlike federal student loans, our private
loans are credit-based, so you don’t have to demonstrate
financial need to get one,” says Sharon Slade, director
of client services for the Loan to Learn Corporation (loantolearn.com),
part of EduCap Inc.
How to apply
To apply for a private loan, you’ll have to fill out an
application from the bank or loan company you plan to use. Before
you do that, ask your parents if they’ll be co-borrowers.
“You can maximize your chances of being
approved, obtaining a larger loan and getting more beneficial
loan terms by applying with creditworthy co-borrowers—typically,
one or both of your parents,” Slade says. “At least
one of you must be a U.S. citizen or permanent resident, have
a good credit history and a verifiable annual income of at least
How to pay it back
You may have decades to repay your student loans. But just because
you have that much time doesn’t mean you should take it.
You can save a lot in interest charges if you pay it back sooner.
“Many people are surprised to learn how much control student
loan borrowers have over their own repayment terms,” Slade
says. That control can mean adjusting your monthly payment dates,
arranging for automatic payments and qualifying for discounts.
No matter what kind of student loan you have,
if you’re finding it difficult to pay it back, contact your
lender to ask what can be done. Keep paying your student loans
until you work out another arrangement with your lender!
Q: I think my college has a “preferred lender.”
What does that mean?
A: “Schools often have a preferred lender list, which means
they prefer that you work with one of the selected lender partners,”
Fiorenzo says. “The preferred lenders are picked for a variety
of reasons, including but not limited to customer service, bank
reputation, borrower benefits, etc.”
You don’t have to use your school’s preferred lender;
consider it the equivalent of just a “seal of approval.”
This article is provided by The
Next Step Magazine (nextSTEPmag.com), a publication that helps
students prepare for life after high school.