Q: When should a student start to apply for student loans? I have heard that some student loans are awarded on a first come, first serve basis, and I want to make sure I get all the student loans I need for college next fall. When is the earliest date a student can apply for student loans before they start school?
A: There are essentially two different types of student loans for college. There are federal student loans for college, which are student loans guaranteed and backed by the government, and private student loans for college, which are student loans, offered by private banks, lenders, and other financial institutions. It is highly recommended for students to apply for federal student loans before applying for private student loans. Federal student loans offer some of the lowest interest rates on the market, offer multiple repayment plans, and some federal student loans offer subsidized interest, which means that the student will not accrue interest on the student loan while they are in school. Students can apply for the different federal student loan programs by completing a FAFSA. By completing a FAFSA students are applying for all federal financial aid available, including federal student loans and grants for college. Students can complete a FAFSA beginning January 1st of any given academic year, because some federal financial aid programs do offer funds on a first come, first serve basis, students should complete their FAFSA as early as possible. The FAFSA will require income tax information, however even if you have not filed your income taxes for the year, you can still complete the FAFSA, and then update the income tax section once you have filed your taxes.
The second type of student loans are private student loans, unlike federal student loans for college private student loans are based upon a borrowers credit profile, and not upon a borrowers financial need, like federal student loans are. Students who do not receive enough from federal financial aid typically use a private student loan to bridge the gap and cover their full college costs. Unlike federal student loans for college, private student loans typically have no deadline; they are available to borrowers throughout the academic year. Each private student loan and private lender is different, offering different interest rates, repayment options, and terms. Students should carefully compare private student loans and lenders, fully understand the terms, and only borrow the amount they absolutely need to cover their additional college costs.