Et cetera : 7 Tips to Getting a Student Loan

by Jim Schipper
Iowa Student Loan Liquidity Corporation Board

Many families turn to federal and private student loans, like those offered by ISL Education Lending, to cover remaining college costs after savings, earnings and other financial aid. But the options for college financing can be confusing. Here are seven tips for getting a student loan.

1. Understand the difference between federal and private loans. Federal student loans are provided by the federal government and are offered based on the results of the Free Application for Federal Student Aid filed by college students. Private student loans, on the other hand, are offered by private lenders.

Federal student loans have an annual limit based on year of college and may have interest subsidized by the government while the student is in school. Generally, private student loan amounts are limited to the amount required to cover the remaining cost of attendance as certified by the school. While they may qualify on their own for federal student loans, traditional-age college students often need creditworthy cosigners for a private loan.

Interest accrues daily on all student loans from the date they are disbursed to the school.

2. Think about the total cost of repayment before accepting or applying. The time to understand the total debt of principal, fees and potential interest is before accepting a federal student loan or applying for a private one. Generally, to help ensure that student loans can be successfully repaid, ISL Education Lending advises that total college debt for all years of college be no more than a realistic starting salary for the student's desired career.

3. Choose federal student loans first. ISL Education Lending recommends that students accept subsidized and unsubsidized federal Direct Loan Program student loans before considering private student loan options. Federal student loans typically have better rates, repayment assistance and protections than other loans, including other types of federal loans.

4. Research private student loan options. When federal student loans are not enough to cover the full cost of attendance, students may turn to private loan options, such as those offered by ISL Education Lending. Because the offerings by multiple lenders have different features, and some specific details may be difficult to find, it can be difficult to compare them to each other. In general, students and families should consider:
. Interest rates. Keep in mind that few applicants qualify for a lender's best advertised rate.
. Length of repayment. Stretching loan payments out over more years may result in lower monthly payments, but it may also cost more in the end due to daily interest accrual.
. Fees, such as origination fees, prepayment penalties or late payment fees.
. Repayment options and assistance. Compare the options for making payments during college to keep overall repayment lower, opportunities to delay payments in times of financial hardship, and loan forgiveness or cosigner release options, among other features.

5. Compare loans for parents carefully. Financial aid notifications often include federal parent PLUS loans. If parents or other adults are considering taking on debt to help a student with college costs, the features of the federal parent PLUS loan should be compared to those of private loans for parents. Because these loans generally cannot be transferred to the student later, borrowers should be aware of their repayment obligations as well as the features listed above for private student loan comparisons.

6. Complete application, disclosure and certification forms promptly. The student should follow instructions from the college to accept any federal student loans.

If a private loan is necessary, the applicant will need the student's and the borrower's Social Security number. The lender will also require names and contact information of references to contact in the future if the borrower is unreachable. Traditional college-age students may also need to have the names and contact information of one or two cosigners, who will complete an application after the student submits the initial application.

Be prepared for the lender to request a credit report for the borrower and cosigners. You may also be asked to provide paystubs or tax returns for underwriting purposes, and the college will likely need to certify the loan amount.

After a private loan is approved, the borrower will need to accept the loan and review final disclosure documents and a self-certification form. Completing all these steps promptly will ensure the loan funds are sent to the college in a timely manner.

7. Know when to refuse or cancel a loan offer. If a student is offered more in federal student loans than is truly needed, some or all of the funds may be declined. The student should follow instructions in the offer notification or financial aid portal to decline a full or partial offer; the college financial aid office can also assist.

A private loan offer can be refused after approval if the interest rate offered isn't suitable. If circumstances change after a loan has been accepted but before the funds have been sent to the college, the loan amount may often be canceled or reduced without consequences.

Learn more about the private education loans ISL Education Lending offers at www.IowaStudentLoan.org