Are you a high school or college student who is considering taking out a student loan to help pay for your education? If so, you may be wondering how long it takes to get a student loan. Generally speaking, you can expect your application to be processed in as little as a few days, to as many as a few weeks, but it could be months before the loan is disbursed depending on a number of factors: when you applied for the loan, the start of your school term as well as possible delays due to the lender or type of loan you applied for.
In this article, we’ll look at the types of loans, the timeline for getting a student loan, and tips for speeding up the overall process.
Types of Student Loans
There are two main types of student loans: federal and private. A federal student loan is money lent to you by the U.S. Department of Education with a fixed interest rate and managed by a federal student loan servicer. A private student loan is provided by a bank, credit union, or other lending entity and may have a fixed or variable interest rate.
Federal Student Loans
When it comes to federal options to help you pay for school, there are three types of federal student loans:
Direct Subsidized Loans
Direct Unsubsidized Loans
PLUS Loans
Federal loans for anyone require completion of the Free Application for Federal Student Aid (FAFSA®) and the amounts offered are based on your financial need. Your financial need is determined by your school based on your cost of attendance and the information you provided on the FAFSA. Subsidized loans are need based loans where no interest accrues during grace or deferment periods or while you are enrolled half-time or more and unsubsidized loans are not need based and begin to accrue interest upon disbursement. Subsidized loans are for undergraduate students only, while unsubsidized are for any student and PLUS Loans are available to parents of dependent undergraduate students and graduate or professional students.
Click Here for FAFSA Guides and Resources
Private Student Loans
Private student loans are not based on your financial need and typically require a credit check. The available interest rates and terms may vary depending on the lender as well as the creditworthiness of the borrower. Private student loans are most often utilized when there is a gap in funding after all federal options have been exhausted, given private student loans generally have less forgiving repayment terms than federal loans.
Student Loan Timeline
When it comes to getting approved for a student loan, understand that the timeline will depend on the lender as well as the type of loan. In general, these are the steps you can expect to go through when getting a student loan:
Apply for a Student Loan
No matter what kind of loan you are applying for, it’s important to be prepared with all of your necessary documents and information. This information may include identification documents such as your driver’s license and or social security number. Private student loans may require a credit check on you or your cosigner (if you have one). If you are applying for a federal student loan, you will need to fill out the FAFSA. Filling it out is free. It’s helpful to have a parent to help you fill this out.
Loan Processing Time
If you have applied for a federal loan, it may take 1-2 weeks to process depending on if the FAFSA was completed online or mailed in, whereas a private loan lender could take a few days to several weeks to process.
Processed FAFSA Applications
Once the FAFSA is processed you can expect to receive a Student Aid Report (SAR) as well as financial aid award letters from schools you were accepted to. After deciding which types of aid offered you want to accept you will be required to attend loan counseling and sign a Master Promissory Note (MPN) prior to the release of any funds for disbursement.
Disbursement of Funds
Once you have been approved for a loan, your money will be directly disbursed to your school at the beginning of your school term. Upon applying payment for your tuition and fees—the direct costs you owe the school, any leftover funds may placed in an account with the financial aid office or it could be paid out to you in the form of a refund check. Check with your financial aid office for more information on how your school handles fund disbursement.
Learn more about Financial Aid Disbursement
Factors that may Affect the Timeline
While there are many different factors that can impact your loan, here are a few that you can keep in mind as you are applying:
- Completeness of Application: make sure you fill out your application completely and provide all required documentation.
- Verification Requirements: the lender may need to verify the information you provide which may take additional time. If you’re only borrowing federal student loans, your financial aid office may request you to complete FAFSA Verification. Which essentially means they will ask you to provide certain information to complete your financial aid processing.
- Loan Type and Lender Policies: different lenders may have different policies and processing times for loans.
- Time of Year: loan processing times may be longer during peak application periods, such as before the start of a new school year.
Tips for Speeding Up Your Student Loan Process
You may be looking to streamline your loan application or disbursement, so take these tips into consideration:
- Submit a Complete Application: provide all the required documentation and fill out your application completely; ask questions if you don’t understand what is being asked.
- Respond Promptly to Additional Information Requests: if your lender needs more information from you, respond quickly as to avoid delays.
- Choose an Efficient Lender: do your due diligence and carefully research lenders and choose one with a reputation of quickly processing loan applications.
- Plan Ahead: Apply for your loan early to allow for plenty of time for processing and disbursement.
Managing Your Financial Aid Funds
Waiting for your funds to come in can be nerve-wracking but be ready to responsibly manage those funds.
Prioritize your expenses for school with a list.
Priorities would be considered as things like housing, meal plans or books. Use this list to help decide where your loan funds should go.
Understand the cost of your refund
If there are excess fund after disbursement, understand there is a cost to this money. If you do not need this money (such as for your housing, books, supplies, etc.), check with your financial aid office to return the extra money to your lender. If your financial office is unable to do return the funds, make a payment on your loan.
If you do need these funds to pay for housing or other education related expense, you need to understand when you can expect to have access to the money. Since most school’s won’t disburse your loan funds until the start of your term and possibly as long as 30 days after your first day of enrollment (if you are a first-year undergraduate or first-time borrower), you will not be able to count on those funds to cover a rent expense weeks before the start of your term. You’ll need another solution to hold you over.
Look out for a notification from the U.S. Department of Education as they will inform you of the date(s) your school will disburse your Direct Loan money and your loan servicer will also notify you when the money was actually disbursed.
Get a bank account
With many schools offering direct deposit options, using a bank account for your financial aid refunds can make it easier to for your school to deposit the funds. Many banks offer student accounts with no fees or minimum balance requirements.
Create an emergency fund
Everyone should have an emergency fund, including college students. Even if you’re only putting in $20/month, you will be grateful for your stashed money when a crisis may arise.
Getting a student loan can be a crucial step in achieving your educational goals, but it’s important to consider the timeline when applying for a loan. Whether you are applying for a federal or private loan, make sure you understand the process and allow enough time for processing and disbursement. By following these tips and seeking assistance when needed, you can do your part for ensuring a smooth and timely process.