When Should You Apply for a Private Student Loan?

When deciding on something as crucial as paying for college, you should make sure your timing is perfect. And for private student loans, there’s no time like the present.

A private student loan is an ideal option for a student who needs to bridge the gap between tuition gift money, such as grants and scholarships, and the price of tuition.

Private student loans can help you feel more secure. College years can be unpredictable, and it may help you feel less worried about making ends meet while going to school if you have some private loan money to back you up.

Depending on the type of institution you use – bank, FAFSA, or a credit union – you can negotiate different loan terms and repayment plans.

Know Your Deadlines: Federal Money

The very first thing you should do is fill out a FAFSA form. FAFSA stands for Free Application for Federal Student Aid.

In the academic year of 2020 to 2021, FAFSA opens online on October 1. The final deadline for your FAFSA application is June 30, 2021. It’s always a good idea to apply as early as possible. That way, you can put your full concentration on exploring other ways to pay for college, and you won’t be side-swiped by any delays.

You also need to know your state deadline for FAFSA. For example, even though FAFSA’s deadline is in June, Michigan’s FAFSA deadline was March 1st in 2020.

Finally, there may be discrepancies from school to school. A tiny, liberal arts college in Vermont will have different financial aid expectations than a large state school in California. In terms of financing your college education, it pays to do your homework.

The Awards Letter

You need to complete your FAFSA form before the financial aid office of the school you’re applying to can send you an award letter. FAFSA qualifies you for more than one type of money gift or loan.

You will soon receive an awards letter that will inform you of any scholarships, grants, or federal student loans you’re qualified to receive. And there are even grants that you don’t have to pay back, like a Pell Grant.

After you have cobbled together all the grants, scholarships, and federal loan money you can muster, then it’s time to start looking at private student loans as another option to pay for your college.

Deadlines for Private Student Loans

You can apply for private student loans at any point, but you will want to be deliberate in your scheduling. Time it so that you won’t have to rush the process of applying or deciding. Choosing a college and a financial plan is a big decision, and you should put some thought into it.

Private lenders look at your credit history, and if you’re getting parent loans, your folks’ financial history. The better the credit score, the better the loan interest on your private loan, the less you pay in installments for your education.

Your good credit will, in the future, depend on how timely you are at paying off your loans, so try and pay your student loans on time every month. Even if you plan to be a graduate student, you will still have to make an income to pay off your monthly student loan bills.

Why Private Loans are Effective and Affordable

Banks and credit unions offer private student loans and parent loans to help students pay for their secondary education. The amount you borrow and your credit history (and your parents’ credit history) significantly affect how much you pay every month and your interest.

Be sure to check the option of a grace period before you sign your loan agreement. Some financial institutions give their borrowers some time, even the span of their college career, so they can work in their chosen profession for a while before beginning to pay off their loans. Usually, grace periods aren’t that long, but it’s worth it to check.

Private Loans Are Quick

With so many applications and forms, it’s easy to get confused in the college application process. But private student loans, especially, are quick and easy.

You can usually get a loan approval in a few minutes, although the formal paperwork may take a few weeks to come through. If you cosign with someone else who has higher credit, like a parent, it can make your credit rate increase and provide you with lower interest rates.

Unlike FAFSA, there are no deadlines for private student loans, although it is better to get your paperwork completed sooner rather than later to avoid any timing mishaps.

You Have Options With Private Loans

With federal loans or scholarships, you apply, and then you find out what amount of money you’re eligible for in the awards letter. But with private student loans, you have choices.

When you finance with a bank, you may get high-interest rates, according to your credit. However, if you go through a credit union, you may forge a loan agreement with relatively low-interest rates. Credit unions usually offer more attractive interest rates, but you have to apply for and be accepted to a credit union before you can borrow money.

Understand What You’re Paying For

You may be shocked when you see your first tuition bill to note that the number on the paper is nowhere close to the one with which you’d been calculating loan options.

The cost of attendance is not the same as the total costs for secondary education. When you’re looking for your perfect repayment option, you need to consider the total cost of college, including room and board, taxes, parking passes, and other added charges.

Private Student Loan

The Final Word

Figuring out how to pay for college is tricky. It takes business acumen to stay on top of all the deadlines and forms that have to be filled out. The most important documents are undoubtedly the FAFSA, which will put you in the running for multiple loans and financing options, and your private student loan application.

Unlike federal loans and scholarships, private student loans from either a credit union like T&I Credit Union or a bank can offer you attractive interest rates, especially if you’re applying for a loan with someone who has excellent credit.

No one should have to forego their dreams because of money issues. Talk to one of our loan experts today to start your academic journey. The best time to apply for a private student loan is right now.

About Ester Havisham

Ester is a media professor and content creator based out of Pittsburgh, PA. She has an MA in English Literature and Creative Writing. In her free time, she enjoys reading and writing about technology, health and wellness, and travel. Her favorite book is Zen and the Art of Motorcycle Maintenance.