How to Get a Student Loan in the USA?- The USA is a popular destination amongst parents to send their children for higher education. While it’s popular it is also quite expensive. It can be a costly affair for their students, let alone foreigners who are coming from developing countries. As per a report by HSBC, the average cost of a degree course can come out to be USD 99,417. Not everyone can afford this much money in one go. But does mean that you have to let go of your dreams? Absolutely not! Student loans can be really helpful in such cases.
Also Read- How to Get a Student Load Without Co-signer.
There are two types of loans students can go for:
- Federal Student Loans and Federal Parent Loans – These loans are provided by the federal government
- Private Loans – These loans are provided by private lenders like banks, credit unions, etc.
Let’s understand these loans before we get into the process of How to Get a Student Loan in the USA?
Federal Student Loans and Federal Parent Loans
These loans are given to the citizens of the USA funded by the federal government. There are four types of federal loans namely:
- Direct Subsidized Loans – The interest is subsidized for some time. Usually given to students who have financial needs. This type of loan can be applied without a co-signer.
- Direct Unsubsidized Loans – The interest needs to be paid by the student. There’s no need to show financial need. This type of loan can be applied without a co-signer.
- Direct PLUS Loans for graduate and professional students – The credit history of the one applying will be checked. The lender is the US Department of Education.
- Direct PLUS Loans for parents – The credit history of the parent who is applying for the loan is checked. Financial need is not required to be shown.
As compared to private loans, federal loans are more flexible. The interest rate is also low and fixed.
How to apply for Federal Loans?
The process for applying for Federal Loans is easy. Federal Student Aid also has a website with extensive information.
The application process to get a Student Loan in the USA is given below:
- The students need to fill out the FAFSA. It must be submitted before the deadlines. The submission begins on October 1st. Also, please check your state’s guidelines.
- Then you have to review your Student Aid Report (SAR). This document has the information you put out on the FAFSA. It includes the estimated family contribution and eligibility for federal loans and grants. The process is quite fast. So, it arrives within a week or two after the submission of FAFSA. Make sure to check all the information.
- Now, you can compare the fin
- ancial aid award letters. You can accept all of the aid or only a part.
- Once you accept federal loans, you have to finish entrance counseling and sign the Master Promissory Note (it is a legal document that says that you will pay back the loan). Entrance counseling is mandatory for first-time borrowers. It will help you in understanding terms and conditions and your rights and responsibilities.
Private loans are provided by private organizations like banks, schools, credit unions, etc. For the citizens, it is advisable to exhaust the federal loans first and then consider private loans but for foreigners, federal loans aren’t an option. They have to depend on private loans. Various banks offer education loans to students. The process of each institution is different but there are a few basic steps that are discussed below:
- The admission process usually starts in October for the major Universities. So, you must apply for the loan in advance although there is no deadline for applying for private loans. The procedure of loan evaluation, loan sanction and procuring solvency letters must be started. Unlike some federal loans, you don’t need to show financial need but your credit scores will be checked by the bank. The loan disbursement is done once the bank receives the confirmation letter and i20 from the university.
- Research on the lenders and compare their interest rates, payment terms, etc. You can also check if the University has a list of preferred lenders.
- Your eligibility for getting a private loan will depend on your credit history, credit score and income. All these factors must work in your favor. A cosigner is also needed in most cases.
- You and your cosigner need to have some documents handy like:
Documents issued by the government
- Personal information like name, phone number, address, etc. and documents supporting it
- Employment information
- A list of assets with their value
- Gross income
- Copy of Tax Returns
- Monthly rent and mortgage
You might also need some information about your college like the name of the college, which course you’ll be pursuing, the year of graduation, the total cost to attend the college, how much financial help you need.
- You also need to fill out an important document known as the Private Education Loan Applicant Self-Certification form. It is issued by The Department of Education.
- Then you have to formally submit a formal loan application. You must keep basic information about you and your cosigner handy as it’ll be needed while filling out the form.
The process of getting a loan for a private lender may vary from lender to lender. So, please visit the lender’s website and do the research.
Education loans can be very helpful if you want to pursue the course of your dreams from your favourite college. You won’t have to compromise because of the finances at least. Both federal loans and private loans have their set of pros and cons so do consider that. We wish you all the best in your endeavors.