Beginning Your Student Loan Application: A Guide for High School Students

It’s never too early to start preparing for college. In fact, if you’re in your junior or senior year of high school, then you’ve probably already begun preparing for college. Perhaps you’ve been hard at work studying for the SAT, keeping up your GPA, and completing college applications.

These are all important parts of college preparation, but determining how you’ll pay for college should be a priority too. Now that college costs so much, it’s more important than ever to have a plan for how you’re going to pay for things like tuition, rent, and other expenses. For many students, that means taking out some student loans.

If you’re looking to get a jumpstart on student loans, here’s everything that you need to know.

Will I Need a Student Loan?

Whether or not you will need students loans depends on your personal financial situation and family contribution towards the cost of going into college. However, there are a few major factors that will determine your ability to pay for college and how much money you will need to borrow if you do need to take out a loan.

• Do you have a college savings account? If your family has been saving for your education, you may be able to take out fewer loans. In some cases, you may not need any. College savings can take many forms, from money in a bank account to a 529 college savings plan. Before applying for student loans, see if you have any savings that can help you pay for college.
• How much federal financial aid will you receive? If you are a dependent when you are filling out the Free Application for Federal Student Aid (FAFSA) you will determine your Expected Family Contribution (EFC). This is the amount of money that your family will be expected to contribute to your education for the year. If you are an independent student, your EFC is automatically zero. Typically, the lower your EFC is, the more federal aid you can expect to receive.
• Are you a scholarship recipient? Scholarships are great ways to pay for college. Unlike loans, you will not have to pay scholarships back unless you fail to meet some requirements of the scholarship after it has been disbursed to you. Apply for scholarships wherever you can. It costs you nothing to apply and the right scholarship can go a long way towards paying for your college education.
  Even if you have scholarships, federal financial aid, or a savings account, you may still not have enough to pay the full cost of your education. This is where student loans come in.

What Types of Student Loans Are There?

When you’re first looking at the student loan options available, you may find yourself a little confused. Most high school students don’t have a lot of experience with finances in general, and there’s a lot of technical jargon associated with them. In general, there are three kinds of student loans that you need to be aware of. Knowing how they work will help you get the student loans that are right for you.

Subsidized Federal Loans

Subsidized loans are student loans provided by the federal government — specifically, the Department of Education. Student loans from the government are meant to equalize opportunity of education across income levels. The government pays interest on subsidized loans while you’re still in school, which leps to make education more accessible.

Loans of any kind will usually accrue interest. When you pay the loan back, you’re paying back the original balance plus the interest that accrued. Student loan interest works like this: the government sets an interest rate and interest accrues at that rate. Then, the interest that accrues on your loans is added to the total that you’re expected to pay back. With subsidized loans, the government will take care of any interest that accrues on your loan while you’re in school. Of course, you must be enrolled at least half time at an accredited institution during that time. Basically, with subsidized loans, you don’t have to worry about interest on your student loans until after you’ve graduated.

Unsubsidized Federal Loans

Unlike subsidized loans, the federal government will not help you with interest on your unsubsidized loans. You won’t have to pay interest until after you graduate, but it will be steadily accruing while you’re in school.
Unsubsidized loans are typically available in greater amounts than subsidized loans, but they can cost you more in the long run. When it comes to federal student loans, take out your subsidized loans first. Having a college budget for yourself will help you understand how much you will need to take out in student loans each year.

Private Student Loans

We’ve talked about federal student loans, but there are also private student loans. Private lenders can be banks, credit unions, or other companies that lend to college students and their families.
Private student loans have some differences compared to federal student loans. Unlike federal loans, some private student loans start repayment while you are still in school. Private student loans are usually based on creditworthiness whereas federal student loans are based on need.
Private student loans may be a good alternative when you have a high credit score, if you have borrowed the maximum federal student loan amount, or if you need to take out a loan mid-semester.

How to Apply for Student Loans?

The first step towards applying for federal student loans is to fill out your FAFSA. The FAFSA is an online form that gathers all the relevant financial information about you and your family. The Department of Education then uses this information to determine your eligibility for financial aid. Regardless of whether you plan on taking out student loans, you should still complete your FAFSA before your school’s deadline. Doing so can make you eligible for grants and scholarships that will help you pay for school.
As part of the application process, you will probably be asked to complete student loan entrance counseling. Entrance counseling serves to prepare you for the commitment of taking on student loan debt. It will familiarize you with student loans and prepare you to take on the responsibility of repaying your student loans.
Private student loans don’t go through FAFSA. If you want to apply for a private student loan, you should contact a company that provides student loans. It’s a good idea to weigh your options for the best interest rate, repayment terms, and loan amount.

Now more than ever, it’s critical to begin preparing for college early. Start exploring how to pay for college now and learn about student loans before you need them.