Last Updated on May 19, 2022
Taking out student loans can be a daunting task. It’s hard to know how much you’re going to need and how long you’ll take to pay it back. But don’t worry! We’ve put together an easy guide on how to take out student loans so that you can get your degree with little hassle and stress.
First, let’s look at how much you need. Your financial aid package should include a breakdown of how much money you will be receiving from the government, as well as how much money your school is offering in scholarships.
If you’re receiving grants or scholarships from the government, you won’t have to pay those back—but if your school offers grants or scholarships, they often come with strings attached: You may have to maintain a certain GPA or stay enrolled in classes for a certain number of years before they are forgiven.
Now let’s talk about loans! Student loans are basically just like any other type of loan: You borrow money from someone (your bank or lender), and then when it comes time for repayment, they expect payment in full. Student loans are very different from other types of debt because they usually only cover tuition costs—they don’t cover living expenses like food or housing costs, which means that
How Do You Take Out Student Loans
Student loans are one of the options students and their families have to help pay for college, but they are a serious financial commitment. It’s important to learn how to take out a student loan so you can make sure you’re borrowing only what you need.
Remember, a student loan is paid back with interest so before committing, make sure you secure as much funding as you can from sources you do not have to repay, such as scholarships, grants, or savings and income.
Taking Out Federal Student Loans vs. Taking Out Private Student Loans
There are two kinds of student loans you can get, federal and private. Federal loans are underwritten by the U.S. government and private loans are offered by private entities, such as a bank.
To take out a federal student loan, you file the FAFSA, or the Free Application for Federal Student Aid.
To take out a private student loan, you have to choose a lender and complete their application process.
Consider federal loan options in the student’s name first since they tend to have low fixed interest rates and special benefits only available on federal loans. Then use a private loan to help fill the gap.
Let’s take a closer look at how the process works for each.
How to Take Out a Federal Student Loan
There are three main kinds of federal student loans – Direct Subsidized, Direct Unsubsidized, and PLUS Loans – and the borrowing process is similar for all of them.
- Fill Out the FAFSA
The first step in taking out a loan for college is completing the FAFSA. The government and some schools use the FAFSA to determine which aid you’re eligible for including grants, work-study, and loans. States and schools also use the FAFSA to determine financial aid offers.
Can student loans be taken out at any time? Well, much of federal, state and school aid is awarded on a first-come, first-serve basis so make sure to complete the FAFSA as soon as it becomes available on October 1st the year before you will enroll. Each school and state have their own deadlines so take note of those important dates.
If taking out a PLUS Loan, there is an additional PLUS loan application that you will file along with FAFSA.
- Review your Student Aid Report (SAR)
Shortly after filing the FAFSA, you will be mailed a student aid report, which is a summary of the information you provided on FAFSA. Double check the information and make any corrections.
- Understand Your Financial Aid Award Letters
Schools mail your financial aid offers, which include federal student loans, around the same time they send their acceptance letters.
Review all of the aid you were offered, including which loans you qualified for and for how much. If you applied to more than one school, compare your offers. They may not be the same for every school.
- Choose Your Loans
Once you’ve compared your options, it’s time to choose a school and decide which loans you want to accept (or decline). Let your school know before the deadline stated on the award letter.
If you have additional questions about your loan options, reach out to your school’s financial aid office for more help on taking out student loans.
How to Take Out a Private Student Loan
If you still need help financing your college education after securing scholarships, grants and federal loans, a private student loan can help cover the difference. Here’s how to take out a private student loan.
- Research Private Student Loan Lenders
There are many different private student loan lenders, but they all have their own offers. Look for lenders with low interest rates and flexible repayment terms. Do your due diligence by reading reviews and asking for recommendations.
To help you shop, use a student loan calculator to estimate costs based on available interest rates. Another way to get an estimate without impacting your credit is to prequalify, which uses a soft pull of your credit report that does not affect your score. Not all lenders offer this benefit.
- Find a Cosigner
Having a cosigner with good credit can help you qualify for a private student loan and secure a lower interest rate.
Not everyone who takes out a private student loan needs a cosigner, but it can help if you don’t have credit or good credit. Most undergraduates need one because eligibility for private loans is credit-based and younger students usually haven’t had the time to build up qualifying scores.
- Choose a Private Student Loan Option
After you’ve shopped around, found a cosigner, and estimated costs, it’s time to apply. Remember that you can apply and take out a loan for school. Remember that you can apply to multiple lenders to see who offers the best rate, but try to apply for private loans within a short period of time.
Each time you apply for a student loan it can count as an inquiry on your credit. Having a lot of inquiries can have a negative, short-term impact on your credit score. But if you apply to several lenders within a few weeks, it will be seen as shopping for the best lender and best rates, and may only count as one inquiry.
Taking Out Student Loans
College is a significant investment. Student loans can help you cover the cost so you can earn a degree and start your career, but they are paid back with interest so it’s important to only borrow what you need.
Before you take out a student loan, make sure to carefully review your repayment options and think ahead about how you will pay it back. Create a budget and stick to a plan so you can repay your student loans responsibly.
If you have additional questions about how to take out student loans, please visit our FAQ page, or feel free to contact us with any concerns.
how do you take out student loans
If you are employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, you might be eligible for the Public Service Loan Forgiveness Program. Keep reading to see whether you might qualify.
To ensure you’re on the right track, you should submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF Form) annually or when you change employers. We’ll use the information you provide on the form to let you know if you are making qualifying PSLF payments. This will help you determine if you’re on the right track as early as possible.
*This provision will be waived through October 31, 2022 as part of the limited PSLF waiver. Learn more.
Suspended Payments Count Toward PSLF and TEPSLF During the COVID-19 Administrative Forbearance
If you have a Direct Loan and work full-time for a qualifying employer during the payment suspension (administrative forbearance), then you will receive credit toward PSLF or TEPSLF for the period of suspension as though you made on-time monthly payments in the correct amount while on a qualifying repayment plan.
To see these qualifying payments reflected in your account, you must submit a PSLF form certifying your employment for the same period of time as the suspension. Your count of qualifying payments toward PSLF is officially updated only when you update your employment certifications.
Digital signatures from you or your employer must be hand-drawn (from a signature pad, mouse, finger, or by taking a picture of a signature drawn on a piece of paper that you then scan and embed on the signature line of the PSLF form) to be accepted. Typed signatures, even if made to mimic a hand-drawn signature, or security certificate-based signatures are not accepted.
Note: In-grace, in-school, and certain deferment, forbearance, and bankruptcy statuses are not eligible for credit toward PSLF.
Have questions? Find out what loans qualify and get additional information about student loan flexibilities due to the COVID-19 emergency.
Qualifying employment for the PSLF Program isn’t about the specific job that you do for your employer. Instead, it’s about who your employer is. Employment with the following types of organizations qualifies for PSLF:
- Government organizations at any level (U.S. federal, state, local, or tribal) – this includes the U.S. military
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program.
The following types of employers don’t qualify for PSLF:
- Labor unions
- Partisan political organizations
- For-profit organizations, including for-profit government contractors
Contractors: You must be directly employed by a qualifying employer for your employment to count toward PSLF. If you’re employed by an organization that is doing work under a contract with a qualifying employer, it is your employer’s status—not the status of the organization that your employer has a contract with—that determines whether your employment qualifies for PSLF. For example, if you’re employed by a for-profit contractor that is doing work for a qualifying employer, your employment does not count toward PSLF.
Other types of not-for-profit organizations: If you work for a not-for-profit organization that is not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, it can still be considered a qualifying employer if it provides certain types of qualifying public services.
For PSLF, you’re generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.
If you are employed in more than one qualifying part-time job at the same time, you will be considered full-time if you work a combined average of at least 30 hours per week with your employers.
If you are employed by a not-for-profit organization, time spent on religious instruction, worship services, or any form of proselytizing as a part of your job responsibilities may be counted toward meeting the full-time employment requirement.
Any loan received under the William D. Ford Federal Direct Loan (Direct Loan) Program qualifies for PSLF.
Loans from these federal student loan programs don’t qualify for PSLF: the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program. However, they may become eligible if you consolidate them into a Direct Consolidation Loan.
Student loans from private lenders do not qualify for PSLF.
Under normal PSLF Program rules, if you consolidate your loans, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the loans before you consolidated them don’t count. However, if you consolidate these loans into a Direct Loan before October 31, 2022, you may be able to receive qualifying credit for payments made on those loans through the limited PSLF waiver.
Now that you’ve learned how to take out student loans, it’s time to learn how to choose the right student loan for you.