Students must file the FAFSA (Free Application for Federal Student Aid) before applying for federal student loans, like Direct Subsidized and Unsubsidized Loans, or a federal parent loans, like the Parent PLUS Loan. Students do not need to file the FAFSA, however, to get a private student loan or a private parent loan.
Eligibility for the PLUS Loan, private student loans, and private parent loans depends on the borrower’s credit history and the credit history of the cosigner or endorser, if any. (Eligibility for Direct Subsidized and Unsubsidized Loans, however, does not depend on the borrower’s credit.) Borrowers and cosigners should get a free copy of their credit history from www.annualcreditreport.com and correct any errors before applying for these loans.
The first step in getting student loans is to apply for federal student loans. Students should always borrow federal first, because federal student loans are cheaper, more available and have better repayment terms. If the federal student loans do not provide enough money, then the student and parents can consider applying for a Parent PLUS Loan, a private student loan or a private parent loan. The private student and parent loans may be lower cost, but don’t necessarily offer the same benefits as Parent PLUS Loans.
After filing the FAFSA, the student may receive a financial aid award letter from the college’s financial aid office by mail or email. The award letter will summarize the need-based financial aid available to the student, which may include the Direct Subsidized Loan.
Some award letters may also provide information about non-need-based loans, such as the Direct Unsubsidized Loan, Parent PLUS Loan, private student loans, and private parent loans. The loan amounts listed are suggestions, not requirements. Borrow only what you need, not as much as you can.
Contact the college’s financial aid office to accept the financial aid package, including the Direct Subsidized Loan (if any) and the Direct Unsubsidized Loan (if needed).
After the college financial aid office receives the loan money from the lenders, they will disburse the funds to the student’s account (usually once per academic term, with no disbursement equal to more than half the net loan proceeds).
The money in the student’s account is first applied to charges for tuition and fees. If the student is living in college-controlled housing, the money will also be applied to room and board charges. Any remaining credit balance may be “refunded” to the student.