EVERYTHING YOU SHOULD KNOW BEFORE APPLYING FOR STUDENT LOANS

By Rashmi Goel
Student loans are loans that are financed by the government or a private lender in order to pay for college. Loans must be repaid after graduation, along with interest. Most loans are used to cover tuition, room and board, books, and other school-related expenses. Scholarships and grants are not repaid, unlike student loans. A student loan application can be completed online and you must submit financial information. Depending on the type of loan you receive, you may be required to meet different qualifications, including a FICO score and an income. In most cases, you will need more than one student loan to cover your entire tuition and associated expenses. Your high school or future college should be able to assist you in navigating the financial aid process. 
Is There An Alternative To Student Loans?
Whether you decide that a student loan isn't right for you or would like to explore other options, there are a number of choices available:
⦁    College tuition is paid by parents
⦁    Scholarships awarded on the basis of merit
⦁    Scholarships for athletes
⦁    A work-study program 
⦁    A savings account or an inheritance
⦁    Funding
Student Loans: What Types Are There?
Federal student loans and private student loans are the two main types of student loans. 
Federal Student Loans: Federal loans are available in a variety of forms, but, in general, they offer lower interest rates and better repayment terms than private loans. The availability of these loans is greater as well as their ease of obtaining, compared to a private loan. There are fixed interest rates available as well as some options that are not dependent on credit history. 
Private Student Loans: After federal student loans have been exhausted, these should be considered. In addition, private student loans can cover continuing education without a degree, tuition for non-U.S. citizens, as well as education expenses incurred after graduation.
This Is How To Chose The Best Student Loans
⦁    Loan terms. In general, the longer the loan term available, the lower the monthly payment on a student loan will be. It is recommended that lenders offer maximum loan terms of at least 15 years, and preferably 20 years.
⦁    APR range. Borrowing money involves interest rates, especially long-term financing such as student loans. There were both fixed-rate and variable-rate ranges included, and all lenders generally fell within the same ranges.
⦁    Fees. None of the lenders on this list charge application fees, origination fees, or any other fees. The lenders who have been determined to charge such fees have been excluded.
⦁    Minimum credit score. Due to the fact that private student loan lenders usually require average or better credit, this criterion is difficult. Apart from Ascent, which offers funding for applicants with fair credit, you may need to apply for federal student loans, which are typically not credit-based.
⦁    Prepayment penalty. Lenders who charge prepayment penalties are specifically excluded from this list, as they do with loan fees.
⦁    How much you can borrow? Loan amounts exceeding $500,000 are preferred by lenders. Even if their maximum loan amount was below the threshold, lenders who offered other advantages were also included.
⦁    Forbearance. With federal student loans, this factor is typically available; however, it is not automatically available with private student loans. There is some type of forbearance offered by each lender on this list, but it is not as generous as the forbearance offered by federal loans. The majority of borrowers facing temporary hardships will likely be able to obtain forbearance of up to one year.
When To Get A Student Loan
You’ll need to get a student loan when the cost to attend college exceeds the financial resources available for you or your family. Those resources can include savings, including dedicated college savings plans, such as a 529 plan, but a Roth IRA could be another option. But they can also include scholarships, grants, and any income you expect to earn while you are in school. Your first source for student loans should typically be federal loans since you will not be required to credit qualify for most programs. However, federal student loans are available in limited amounts, which may require getting additional funding from private sources, such as the providers listed above. In applying for a private student loan, you’ll need to qualify based on your income and credit history. If you can’t, you can add a qualified cosigner. The major advantage of private student loans is that they are available for much higher loan amounts that can cover the entire cost of your education.
The Process Of Qualifying For A Student Loan
Federal student loans are not subject to income or credit checks. Cosigners are not typically required. These programs are designed specifically for those who are not able to pay for higher education.  It is necessary to meet both the income requirements and the credit history requirements in order to qualify for private student loans. In order to qualify for a new loan, your income must be sufficient to cover the new loan payment, as well as your existing recurrent obligations and your monthly house payment. The loan can be obtained either on the basis of your own financial profile or with the help of a cosigner who has a good credit rating.
The Important Features Of Student Loans
Fixed vs. variable loans 
There are two types of student loans: fixed-rate loans for the entire term of the loan or variable rate loans, which change based on changes in the general interest rate environment. Variable rate loans generally carry lower interest rates. Nevertheless, fixed-rate loans will have lower interest rates in the long run if interest rates increase substantially. Student loans provided by the federal government are only subject to fixed interest rates. You can choose between fixed or variable interest rates when applying for a private loan.
Maximum loan amounts
The maximum Federal student loan amount for undergraduates is $31,000 up to $57,500, and the maximum amount for graduate students is $138,500. The maximum amount of a private student loan may range from $150,000 to $500,000. However, some private lenders will extend loan limits to whatever the cost of a student's education may be. The higher borrowing limits offered by private student loan lenders often result in students combining federal and private loans. 
Terms
In the case of federal student loans, the loan term is typically between 10 and 30 years. The term of most private loans ranges from 5 to 20 years. 
Fees 
There is an origination fee associated with federal student loans, which ranges from 1.059% to 4.236% of the loan amount. There are usually no origination or other fees associated with private student loans. 
APR
This is the effective interest rate on a loan, which includes both the base interest rate and any fees required. The net proceeds of a $100,000 loan will be $98,000 if you borrow $100,000 and pay an origination fee of 2%. Considering that the net proceeds of the loan will be reduced with a 5% interest rate, the APR will be slightly higher.
Deferment 
A student loan with Federal assistance is not required to be repaid until six months after graduation. The principal amount of the loan is deferred, but interest accumulates on it, so during the deferment period your loan amount increases. Deferment options for private student loans are numerous. There are some institutions that may offer you a full deferral until you graduate from school. Some lenders will charge a minimum monthly payment while you are in school, which is as low as $25. In addition, there are those who will charge interest only during the period when you are enrolled in school.
Forbearance and loan forgiveness 
There are two types of federal student loans: forbearance and forgiveness. An Income-Driven Repayment plan, for instance, can reduce your monthly payment to a small percentage - usually 10% - of your income. Public Service Loan Forgiveness allows you to forgive your entire debt if you work full-time for either a government agency or a nonprofit organization that qualifies. There is no loan forgiveness program available for private student loans. Forbearance may be provided in certain cases, such as when one is facing economic hardships, such as unemployment. Depending on the lender, specific provisions may differ.
Cosigner release 
Generally, federal student loans do not require a cosigner, so the cosigner release does not apply. Cosigners are, however, common with private student loans. Nevertheless, many lenders offer a cosigner release provision, which allows you to continue with the loan while your cosigner is released from liability. It is common for a lender to provide a cosigner release if you can qualify for the loan based on your own financial resources and have made timely payments for a minimum of 24 months.   
What Is The Cost Of A Student Loan?
Student loans are primarily characterized by interest costs. It is important to note that some loans may also be subject to origination fees, prepayment penalties, and late fees. The interest rates on federal loans tend to be lower, so it is best to apply for them first. The current interest rate for federal student loans for undergraduate students is 3.73%.
Student Loans: Are They Worth It?
There are fees associated with student loans, as well as payments due each month on principal and interest. They may be particularly expensive if you decide to enroll in graduate, medical, or law school along with a four-year college. The best thing you can do if you have an alternative method of financing your college education is to explore it first. Other than that, student loans are generally worthwhile since you are investing in yourself and your education, which will help you find a higher-paying job or learn the necessary skills to start your own business.