The requirements for a student loan can feel more complicated than picking your college or major! Fortunately, we’ve broken down all the details about student loan requirements, so you know everything you need when you contact your school’s financial aid office.
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Types of Student Loans
There are two main types of student loan programs – federal and private student loans. They offer different benefits and have different requirements, so understanding the difference is essential.
A federal loan is from the Department of Education, and the funds can be used at any qualifying school. There are several variations of federal student loans depending on your level in school and who is borrowing the funds, whether you or your parents.
Important Requirements for Federal Student Loans
To be eligible for federal student loans, you must meet the following requirements for student loans:
- Complete the Free Application for Federal Student Aid
- Be enrolled in a qualified school at least part-time
- Be a US citizen or eligible non-citizen
- Have a Social Security number
- Have satisfactory academic progress
- Not have any defaulted federal student loans or owe any money from federal grants
Related Article: Do You Have to Pay Back Grants?
How to Apply for a Federal Student Loan
The steps to apply for federal student loans is simple.
- Complete the Free Application for Federal Student Aid – Everyone must complete the FAFSA application. The results found from this application will determine how much financial aid and federal student loans you qualify to receive.
- Exhaust all scholarship and grant opportunities – Make sure to apply for all scholarships and grants you’re eligible for to minimize how much money you must borrow. Scholarships and grants are free money, but are often merit-based, or earned in other ways, so be sure to apply for anything you might qualify to receive.
- Determine which loans you want to accept – When you receive results from your FAFSA application, you can decide which loans you want and how much you’ll borrow. Your FAFSA results will come from the school you’re attending and include the maximum amount you can borrow.
- You may be eligible for subsidized loans – Take those first. They are based on financial need and have more benefits. If you aren’t eligible for subsidized loans, you’ll likely be eligible for unsubsidized loans as they aren’t based on credit scores or other qualifying information. You don’t have to demonstrate a financial need for unsubsidized loans.
- Consider private student loans – If you need more money to pay for college, applying for a private student loan may be a good option. A private student loan can fill the gaps if you don’t qualify for enough financial aid or federal student loans.
Private student loans are from private banks and have different requirements for student loans. Unlike federal student loans, lenders have a minimum credit score and debt-to-income ratio requirements.
Important Requirements for Private Student Loans
You must enroll at a qualifying school to qualify for private student loans. Typically, most two- and four-year schools and trade schools qualify. Like federal student loans, you must be enrolled at least half-time to get private student loans.
In addition to attending a qualified school, you must prove you can afford the loan. This is one of the largest differences between private and federal student loans. Each bank has different requirements, but you’ll need the following:
- Good credit – Your credit score tells lenders the type of risk you pose. The better your credit, the less risk of default you pose, making you more eligible for student loans.
- Income – You must prove you have enough income to cover the loan payment and other expenses. Lenders look at your debt-to-income ratio to determine if you can afford the loan.
Like federal student loans, you must have a valid Social Security number, be 18 years old, and be a US or permanent resident.
How to Apply for Private Student Loans
The application process for private student loans differs from federal student loans. You don’t need to complete the FAFSA application to qualify. Instead, you’ll complete an application with each lender you want to consider.
Some loan marketplaces offer the option to get pre-qualified for loans, receiving multiple offers from different lenders. This allows you to compare your options, looking at interest rates and loan terms.
You can also look for options like co-signer releases or deferment plans. Private student loans don’t have deferment options by default, but some lenders offer them.
Subsidized vs. Unsubsidized
When looking at federal student loans, you may have the option for subsidized or unsubsidized loans.
Subsidized loans are only for borrowers who demonstrate financial need. If you’re eligible, the Department of Education will pay your accrued interest while you’re enrolled in school at least half-time and during any deferment period.
If you don’t have enough financial need, you will still be eligible for unsubsidized loans. However, the Department of Education doesn’t cover the accrued interest on these loans; it’s your responsibility.
A Parent PLUS Loan
If you are a parent that wants to help with your child’s education, you may consider a Parent PLUS loan. Unlike other federal student loans, these loans consider your credit score and often have higher interest rates than other student loans.
Parent PLUS loans are only for undergraduate students, and the student must be a child or stepchild of the person borrowing the funds. Unlike student loans, Parent PLUS loan repayment starts immediately.
A Grad PLUS Loan
A Grad PLUS loan is for students going to graduate school. You must be enrolled in a graduate degree program and meet eligibility requirements, including passing a credit check. Students may defer payments while in school and up to six months after graduation.
The downside of Grad PLUS loans is the higher interest rates charged. Therefore, exhausting all direct unsubsidized loans before applying for Grad PLUS loans is best.
Determining Borrowing Amounts
Students can usually borrow the full amount allowed each year, but it’s best to minimize how much you borrow if possible.
Determine the Net Cost of Your Education
The first step is to determine the cost of attendance at your school. All schools must provide an online calculator to help you determine your costs.
Next, subtract any money you have saved to pay for college costs and take 125 percent of the difference to determine how much you should borrow.
When considering your net costs, determine if you’ll use the loans to cover tuition and related expenses or borrow more funds for room and board and other qualifying expenses.
Determine Repayment Options
Your student loans will be deferred while you’re in school and for six months after graduation. But then real life begins, and you must repay the loan.
All loans start with the standard repayment option, which is a term of ten years. However, suppose your income doesn’t allow that. In that case, you can apply for one of the income-driven repayment plans to keep your student loan payments affordable, especially during the first couple of years out of college.
Determine the Type of Loan You Will Apply For
Your FAFSA results will tell you what types of federal aid and student loans you can receive. Exhaust your options in this order:
- Subsidized loans
- Unsubsidized loans
- Private student loans
Consider Interest Rates
When applying for student loans, pay attention to the interest rates. Subsidized and unsubsidized loans usually have the lowest interest rates. On the other hand, private student loans and Parent PLUS loans have higher rates and should be used sparingly.
Related Article: How a Student Loan Consolidation Calculator Can Save You Money
Requirements for a Student Loan
To apply for a student loan, it’s important to understand the requirements.
Student Loan Age Requirement
Federal student loans don’t have a minimum age requirement, but private student loans usually require that you are at least 18 years old before applying for a loan.
Your income doesn’t make or break your chances of getting a federal student loan unless you apply for a Grad PLUS loan. Of course, your family’s expected contribution will affect how much money you can borrow, but unlike private loans, your income and debt-to-income ratio don’t affect your chances of approval.
You don’t have to worry about a co-signer for federal student loans. However, if you need to fill the gap with private student loans, you may need a co-signer to qualify.
For example, if you don’t have great credit or any credit history, you may need a parent or another relative to co-sign the loan. Before accepting a loan, determine if there is a co-signer release option in the future to let your co-signer off the hook after you graduate.
Federal student loans don’t have credit score requirements and don’t require a credit check. The only exceptions are the Parent PLUS and Grad PLUS loans, both of which require that you don’t have an adverse credit history.
Private student loans, however, have strict credit score requirements. Each lender requires a different score and uses the credit check and other factors to determine your eligibility.
Debt to Income Ratio Requirements
Your debt-to-income ratio compares your monthly income to your monthly debts. You could have a higher default risk if you have too many debts compared to your income.
Only private student loans look at debt-to-income ratio requirements, as they are from private lenders and not guaranteed by the Department of Education.
Only private student loan requirements look at your employment to ensure you have the income to afford the loan. Federal student loans are deferred until you graduate when the Department of Education assumes you’ll have the income to repay the debt.
Both federal and private student loan requirements have citizenship requirements. You must be a citizen of the US or an eligible non-citizen to qualify.
To complete the FAFSA application to apply for federal student loans, you must provide the following records from your family:
- W-2s and tax returns
- Bank statements
- Investment statements
- Any statements of untaxed income
Grades and GPA
All students with student loans must demonstrate satisfactory academic progress to keep their loans in deferment. In addition, each school has a minimum GPA you must meet; if you don’t, you might lose your financial aid.
If you have proven intellectual disabilities, you may be eligible for grants or work-study programs to cover your costs.
Borrowers must live in the US to be eligible.
Keeping Your Loan Eligibility
To keep your loan eligibility, you must have satisfactory academic progress. In short, you must have good grades and make progress toward your intended degree as determined by your school.
Regaining Loan Eligibility
If you lose eligibility for student loans, you can appeal for reinstatement with your school’s financial aid office. However, regaining eligibility can take time, especially if you need to improve your grades or make up a default. The key is to be patient and don’t give up.
Important FAFSA Requirements
To meet the FAFSA qualifications, you must meet the following.
The FAFSA Age Limit Requirement
You must have at least a high school diploma to apply for FAFSA. They don’t have a minimum age, but you must have that piece of paper.
However, the older you are when you apply for FAFSA, the more you may get because the older you get, the higher the likelihood is that you’re independent and may need more aid.
Who Can Apply for FAFSA
Students enrolled in an eligible program can apply for FAFSA. You must be a US citizen and have a financial need to apply.
FAFSA Income Requirement
There aren’t specific FAFSA income eligibility requirements. Instead, your income, family size, and year in college determine how much aid you’ll receive.
Applying for Student Loan Alternatives
Before applying for student loans, it’s a good idea to exhaust your student loan alternatives as they may offer free money or less expensive options.
Apply for Scholarship Eligibility
There are scholarships available for many reasons, not just merit scholarships. Look around and see what scholarships you may qualify for, including those from religious organizations, your parent’s place of employment, your community, and those directly from your school.
Apply for Grant Eligibility
Schools and communities offer grant opportunities. These are usually first-come-first-served, so apply as early as possible for the opportunities. Like scholarships, grants don’t require repayment.
Apply for Work Study
Some programs offer work-study options, allowing you to work in exchange for tuition or room and board. The jobs can be on or off campus and are a great way to pay for college with no interest.
The Difference Between Loan Alternatives and Student Loans
We highly suggest exhausting your loan alternatives before applying for student loans because you’ll save money on interest. Student loans continue to accrue interest while you’re in school until you pay them in full. This means you’ll pay back much more than you borrow. With scholarships, grants, and work-study, though, you don’t borrow money.
The FAFSA Selective Service
All males over 18 must register with the Selective Service before applying for FAFSA.
Student Loan Repayments
The standard student loan repayment plan is for ten years, but most graduates can’t afford the repayment. If that’s the case, you may apply for income-driven repayment plans that reduce your payments to reflect what you can afford based on your income.
The payments may change annually based on your yearly income, and you must continue reapplying for the program.
Graduates in certain public service industries may also be eligible for student loan forgiveness after making payments for ten years on an income-based repayment plan.
Student Loan Consolidation
You may be eligible to consolidate your student loans if you have several and prefer one payment.
Direct consolidation loans are an option for graduates who want to consolidate their federal student loans. However, you must consolidate with a private loan if you have private student loans.
Use caution, though; if you consolidate a federal student loan with a private student loan, you lose any federal protections offered, including the option for deferment or forbearance.
Pros and Cons of Taking Out a Student Loan
Student loans have many pros and cons that you should understand before applying.
The Pros of a Student Loan
- Help you get an education
- You don’t need good or any credit (for federal loans)
- Federal loans have lower interest rates than most loans
The Cons of a Student Loan
- Student loan repayment can be challenging right out of college
- Student loan debt can make it hard to buy a house or reach other financial goals
- Federal student loans may not cover all your financial needs
List of Common Student Loan Servicers
- Great Lakes Educational Loan Services, Inc.
- Call 1-800-236-4300
- Call 1-888-486-4722
- Call 1-888-272-5543
- PHEAA (FedLoan Servicing)
- Call 1-800-699-2908
- GSM&R Granite State (now EdFinancial)
- Call 1-855-337-6884
- Call 1-888-866-4352
- OSLA Servicing
- Call 1-866-264-9762
How Long Does a Student Loan Disbursement Take?
The first disbursement can take up to three weeks. After that, however, the subsequent disbursements will be automatic and in time for each new term.
When Should Someone Apply for Student Loans?
FAFSA opens October 1st each year, and the sooner you complete it, the more likely you are to get grant funds. After finding out what financial aid you can get, you can apply for student loans, but each state and school has different deadlines.
Can You Apply for Student Loans at Any Time?
Federal student loan requirements are quite strict regarding when you can apply for student loans based on the FAFSA deadline or semester requirements. However, you can apply for private student loans at any time.
Final Thoughts: Requirements for a Student Loan
Consider your student loan needs as soon as you choose a school. Many financial aid awards are limited and first come, first served. After exhausting all scholarship and other financial aid options, you may need student loans. Consider federal government student loans to keep your costs down, but don’t borrow more than you need, as the debt can follow you for many years after graduation. Use these requirements for a student loan to help make your decision!
Samantha Hawrylack is a personal finance expert and full-time entrepreneur with a passion for writing and SEO. She holds a Bachelor’s in Finance and Master’s in Business Administration and previously worked for Vanguard, where she held Series 7 and 63 licenses. Her work has been featured in publications like Grow, MSN, CNBC, Ladders, Rocket Mortgage, Quicken Loans, Clever Girl Finance, Credit Donkey, Crediful, Investing Answers, Well Kept Wallet, AllCards, Mama and Money, and Concreit, among others. She writes in personal finance, real estate, credit, entrepreneurship, credit card, student loan, mortgage, personal loan, insurance, debt management, business, productivity, and career niches.