When to apply for student loans

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If you need a loan for college, you may be wondering whether a private student loan is the right choice for you. And, once you’ve made the decision to take out a student loan, you might want to know the differences between federal vs. private student loans and the deadlines associated with each. Keep reading to learn all that information and more so you can determine how and when to apply for student loans.

 

Related: What can you use student loans for?

What Are Private Student Loans?

Private student loans are student loans that are offered by private lenders like banks or credit unions to help people pay for the costs associated with college. Similar to applying for an auto loan or mortgage, private student loans require a loan application and approval from the lender.

 

Depending on how much money you need for school, you can borrow a set amount from a private lender, but the amount they grant you ultimately depends on financial factors like your income, credit score, and the credit history of yourself and/or your co-signer (if applicable).

 

Unlike federal student loans with fixed interest rates and terms, the fees, repayment plans and interest rates for private student loans are set by the individual lender. Because of this, it’s important to “shop around” with private lenders until you find rates and terms that meet your financial needs.

 

Private student loans can help pay for tuition, books and supplies, and transportation fees. Using your student loan for housing or room and board expenses is also an option.

 

Recommended: Examining the Different Types of Student Loans

Should I Get a Student Loan?

The question of whether or not you should get a student loan is quite personal and depends on your unique financial situation. In a nation where, in 2020, the average federal student loan debt per borrower was $36,510 and the average private student loan debt per borrower is $54,921, taking out student loans is clearly a popular decision, but whether it’s the right decision is a different story.

 

For starters, when deciding whether it’s a good idea to take on college debt, it helps to ask whether a degree would be valued in your desired career. In addition, there are a few other steps you can take to see if taking out a student loan will be worth it in the long run:

  • Look up the tuition, room, board and other costs of attending your desired college(s)
  • Create a budget to determine whether you can afford those costs after factoring in financial alternatives like scholarships, savings, family help, etc.
  • Use a student loan payment calculator to assess how much you can expect to pay in student loan debt when you graduate
  • Research salary levels in your desired field to see if the expected compensation will cover the cost of student loan payments over time
  • Assess how comfortably you can live at your expected income level, factoring in payment estimates from the student loan calculator

Once you’ve whittled down this information, you should have a better idea of whether taking out student loans is aligned with your long-term financial goals.

 

Recommended: How Do Student Loans Work? Guide to Student Loans

Other Steps to Take Before Securing Student Loans

Exploring ways to pay for school without taking on student loan debt is the first line of defense in college financial planning. Since this isn’t always an option, you can minimize your reliance on loans by taking the following steps:

  1. Pull funds from a 529 college savings plan that you or your guardians may have set up for future college costs.
  2. Apply for scholarships and grants to offset the cost of tuition, room, board and other expenses.
  3. Fill out a Free Application for Federal Student Aid (FAFSA) form to start the process of securing federal grants or federal student loans and use this money to cover as much of your tuition as possible.
  4. Opt for Federal Direct Subsidized Loans and Perkins Loans if you qualify.
  5. Offset your remaining college costs with unsubsidized federal loans.
  6. Opt-out of PLUS loans if possible, as their interest rates and origination fees can be steep.

Finally, once you’ve exhausted the six options above, you can turn to a private student loan to cover any remaining costs associated with your college education.

When Is a Private Student Loan a Good Option?

There are some instances where a private student loan might be an option worth considering:

  • You’d like to cover the gap between your financial aid package or scholarship and your college expenses
  • You don’t have specific financial need requirements, but still want help subsidizing the cost of college
  • You’re looking to shop around with lenders to compare multiple loan options before selecting
  • You have strong credit or a cosigner with a strong credit score who could potentially help you qualify for a more competitive interest rate
  • You’re hoping to refinance your student loans in the future

When Should You Apply for a Private Student Loan?

Generally speaking, it’s wise to consider federal student loans first, but if you do decide a private student loan is the right option for you, you might be wondering when to apply for private loans.

 

You can apply for a private student loan directly from the desired lender’s website. It’s wise to apply after you’ve made your final school decision and once you know how much you need to borrow, so you won’t have to submit multiple student loan applications for all the schools you’re considering.

Private vs Federal Student Loans

When it comes to private vs. federal student loans, there are a few features and specifics that can help you make your decision:

Federal Student Loans

  • Funded by the federal government. Terms and conditions that are set by law.
  • Payments aren’t due until after you graduate, leave school, or change your enrollment status to less than half-time.
  • The interest rate is fixed, based on the federal interest rate at the time, and often lower than private loans.
  • No credit check is required to qualify, except for Direct PLUS Parent Loans.
  • Interest may be tax-deductible.
  • Loans can be consolidated,
  • You may be able to postpone or lower your payments.
  • There are several different repayment plans.
  • There is no prepayment penalty fee.
  • You may be eligible for loan forgiveness if you work in public service.

Private Student Loans

  • Funded by private student loans lenders like banks, credit unions, state agencies, or schools. Terms and conditions that are set by the lender.
  • Payments can be due while you’re still in school, but deferment is sometimes possible.
  • The interest rate can be fixed or variable and is based on your individual financial circumstances.
  • Established credit and/or a cosigner may be required to qualify.
  • Interest may be tax deductible.
  • Loans cannot be consolidated, but can be refinanced.
  • You need to check with your lender to see if you can postpone or lower your payments.
  • You need to check with your lender about repayment plans (if any).
  • There could be a prepayment penalty fee.
  • Many private lenders don’t offer loan forgiveness.

Deadlines for Federal Student Loans

To apply for federal student loans, students must fill out the FAFSA. There are three separate deadlines to consider:

1. The College or University Deadline

College deadlines for filling out the FAFSA will vary based on the school itself, but typically occur before the academic year begins. Each college will have its own FAFSA deadline, so visiting their financial aid website for this information is an important first step.

 

To fill out the 2022–23 FAFSA form itself, you can use your 2020 tax information to apply as early as October 1, 2021, and must submit the application by June 30, 2023.

2. The State Deadline

Your home state sets the second deadline when it comes to FAFSA applications. The deadlines are listed on the FAFSA form itself, or you can visit the state deadline list on StudentAid.gov.

3. The Federal Deadline

The U.S. Department of Education sets the final deadline on the list. This entity is in charge of FAFSA and its website will feature the 2022-2023 FAFSA application until June 2023. Federal student aid programs have a limited amount of funds available, so the sooner you can submit your application and avoid encroaching on the hard deadlines, the better.

 

Recommended: FAFSA 101: How to Complete the FAFSA

Deadlines for Private Student Loans

When applying for student loans from a private lender, there isn’t typically a set deadline in place. Still, this doesn’t necessarily mean you want to wait until the last minute, since you’ll need plenty of time before tuition, housing and other fees are due to secure the funds from your student loan.

 

Many private student loan lenders can approve your application in a few minutes or less, but it can sometimes take up to two weeks for full approval. That’s why it’s smart to keep your eyes on your school’s payment deadlines and ensure your funds will be disbursed on time.

What Type of Private Student Loan May Be Right for You?

At the end of the day, there are ways to find the right private student loan for your unique circumstances, all it takes is some shopping around. Considering the following factors can help you determine which type of private student loan makes the most sense for your personal situation:

  • Interest rates and fees
  • Payment flexibility
  • Lender credibility
  • Ability to refinance or release a co-signer
  • Whether the lender sells their loans
  • Repayment benefits
  • Whether the lender is a preferred partner of your college or university of choice (this information is usually found on the school’s website)

Because the rates and terms on a private student loan are determined by the individual lender and are impacted based on the borrower’s personal financial history, finding a private student loan may require a bit of shopping around.

The Takeaway

There are several factors that determine whether you should get a student loan — from what you can afford after factoring in financial alternatives like scholarships, savings, family help, etc., to how comfortably you can live with your student loan payments after graduation.

 

Generally speaking, it’s wise to apply for federal student loans first and turn to private student loans once you’ve exhausted other alternatives. This is because private student loans are not required to follow the same rules as federal student loans, and may lack benefits like income-driven repayment plans or the option to apply for Public Service Loan Forgiveness.

 

Private student loans are offered by private lenders like banks or credit unions to help people pay for college. You can apply for a private student loan by shopping around and comparing interest rates, fees, repayment options and other features on the lenders’ websites.

 

The deadlines for federal student loans are based on the college you plan to attend, the federal FAFSA deadline for the academic year you’re applying, and your state’s FAFSA deadline.

 

Learn more: 

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

 

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SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636  . For additional product-specific legal and licensing information, see SoFi.com/legal.
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Private student loan relief options

 

Private student loans can help fill the gap needed for students to pay for their tuition and living expenses, but they do not have the same relief programs that federal student loans provide.

 

Federal student loans offer more borrower protections after students graduate, especially if they face difficult economic circumstances such as the loss of a job, being furloughed from a position or if their salary is inadequate to pay all their bills.

 

When borrowers take out a federal student loan, they have a few different options to choose from such as forgiveness or deferment programs until their financial circumstances change.

 

Related: How do
student loans affect your credit score?

 

fizkes / istockphoto

 

The options for private student loan relief are fewer. Private student loan forgiveness does not exist and no lenders offer this option.

 

When graduates face hurdles in repaying their private student loans, some lenders provide their own temporary assistance programs. These programs may provide temporary assistance to borrowers and the programs will vary based on the lender.

 

DepositPhotos.com

 

Read the fine print on temporary relief programs offered by private lenders. Generally, interest will continue to accrue while the loan is in forbearance, which can make the loan more expensive in the long-term.

 

However, if you’re struggling to make repayments, securing forbearance could help provide breathing room to help you get back on track without missing payments.

 

If you are not sure whether or not the lender offers forbearance or other temporary assistance programs, try to contact them before missing any payments. They may have an option that could help or be willing to work with borrowers who are struggling.

 

Missing payments can potentially impact a borrower’s credit score. And if the borrower has a co-signer, their credit score may feel an impact as well.

 

Photobuay / istockphoto

 

The federal government has extended some relief options to borrowers with federal student loans due to the COVID-19 pandemic. Most of these policies do not apply to borrowers with private student loans.

 

As of March 2021, some borrowers with private student loans in default qualify to have their student loan payments paused. Borrowers with a defaulted loan made through the Federal Family Education Loan (FFEL) Program, may qualify for the federal protections offered. The FFEL program loans were made by private companies but were backed by the federal government. The program ended in 2010.

 

 

BackyardProduction / istockphoto

 

Since there aren’t any real loan forgiveness options available for borrowers with private student loans, repaying them may become a financial priority. The repayment period for private student loans may vary based on lenders, so review the terms and payment schedule with your lender.

 

Some private student loans may have a grace period—a period of time after a student graduates where payments are not due. This will depend on the lender, so review your loan terms to find out if your private loan is eligible for a grace period. Interest may accrue during the grace period.

 

DepositPhotos.com

 

Other strategies to that can help students as they repay their student loans include:

  • Budgeting with Purpose. Factor student loan payments into your budget and prioritize repayments.
  • Enrolling in automatic payments. This can help you avoid missing payments. Some lenders may even offer a rate discount to borrowers who do enroll, so it’s worth asking.
  • Funneling additional income to student loans. Influx in cash thanks to a recent birthday, tax refund, bonus at work? Make an overpayment to the student loan.
  • Consider refinancing. Student loan refinancing can help qualifying borrowers secure a more competitive interest rate or preferable terms. Lowering the interest rate on a student loan could help borrowers save money over the life of the loan.

 

 

DepositPhotos.com

 

Refinancing could result in a lower interest rate which could also lower the minimum monthly payment. In some cases, getting a lower monthly payment requires extending the life of the loan, which can ultimately cost more.

 

Student loan refinancing means a new loan is obtained at a new interest rate and possibly a new term or the number of years you have to pay off the loan.

 

Borrowers can generally choose between fixed or variable interest rates, depending on the options available at the lender they have decided to borrow from.

 

Private lenders will generally rely on information like a borrower’s credit score and employment history to determine how much money a person can borrow, and at what interest rate.

 

Borrowers who are able to secure a lower interest rate may find that refinancing can help them spend less over the life of the loan. Additionally, a borrower with multiple private student loans might appreciate the opportunity to streamline their monthly payments to a single sum with a single lender.

 

 

DepositPhotos.com

 

Some borrowers may be able to get some private student loan assistance, depending on the programs offered and policies in place with their private lender. In some cases, refinancing may make sense for borrowers who can qualify for a lower interest rate.

 

Learn More:

This article
originally appeared on 
SoFi.comand was
syndicated by
MediaFeed.org.

 

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636  Opens A New Window.. For additional product-specific legal and licensing information, see SoFi.com/legal.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE  FOR MORE INFORMATION.

 

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