Student researching student loan requirements on laptop

College Success

Most Common Student Loan Requirements

09.29.2022 • 9 min read

Nick Griffin

Subject Matter Expert

Learn what a fixed cost is with some examples, the differences between variable and fixed costs, and why there are no fixed costs in the long run.

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In This Article

  1. What Are the Requirements for a Student Loan?

  2. Private Student Loan vs Federal Student Loan

  3. Student Loan Requirements

  4. 5 Student Loan Tips

  5. Frequently Asked Questions about Student Loan Requirements

Over the past 20 years, the cost of in-state tuition at a public university has increased by 175%. According to U.S. News & World Report, the average annual cost is $11,541 today.

At private institutions, the average annual tuition and fees are a whopping $44,433. This means students need to access more financial aid to afford school.

While many students get grants and scholarships for school, 65% of students take out loans.

By understanding student loan requirements, you will learn:

  • The type of student loan that’s right for you

  • How to access different student loans

  • How to pay them off quickly

What Are the Requirements for a Student Loan?

Two types of student loans exist:

  1. Federal direct loans

  2. Private loans

Since both loans come from separate sources, the application requirements will be different. First determine which loan to pursue.

Private Student Loan vs Federal Student Loan

Think of financial aid as any money coming from another source to pay for college expenses.

Financial aid includes:

After grant and scholarship money has been used, it’s time to look into student loans.

2 Main Types of Student Loans

1. Private Student Loans

A private student loan can cover most educational expenses and come in a variety of terms and interest rates.

Private loans come from a financial institution such as a bank or credit union, which is a loan servicer similar to credit cards, car loans, and home loans. These private lenders base their interest rates on the borrower’s credit score. If the borrower has poor or no credit, you need a cosigner to take out private loans.

The best way to apply for private student loans is by going to your local financial institution and comparing private student loans online.

2. Federal Student Loans

Federal student loans have a fixed limit based on the type of direct loan program you qualify for. These are loans that are taken out directly from the government with the lender being the U.S. Department of Education.

Federal direct loans typically have a lower interest rate than private loans since Congress sets it. To qualify for federal aid, a prospective student must fill out a FAFSA (Free Application for Federal Student Aid).

The FAFSA loan application compares a student's cost of attendance (COA) to their family’s ability to pay for college. This is called the expected family contribution (EFC).

You should apply for federal student loans first. They usually have the best interest rates, and you can qualify for:

  • Deferment

  • Consolidation

  • Forbearance

  • Loan forgiveness programs

3 Different Types of Federal Student Loans

TYPE OF LOANELIGIBILITYAMOUNT AWARDEDINTEREST UNTIL 7/23
Direct Subsidized LoansUndergraduate students with financial need$5,500 to $12,500 per year depending on need4.99% starting 6 months after graduating
Direct Unsubsidized LoansAny grad or undergraduate studentStudent can choose to borrow up to $20,5006.54% starting when the loan is taken out
Direct PLUS Loans or Parent PLUS LoansGrad students or parents of studentsRemainder of college costs after other loans7.54% starting when the loan is taken out

Outlier.org Intro to Accounting instructor Dr. Kelly Richmond Pope breaks down the differences in a simple way:

Student Loan Requirements

Federal Student Loan Requirements

  • An FSA ID (Federal Student Aid Identification) Number - This is assigned to you when you create an account on the FAFSA website and will be used to log in to complete and review your FAFSA. Make sure to write it down.

  • Your social security number (or alien registration number)

  • Federal income tax returns and W-2s - You may be able to get this information from the IRS Data Retrieval Tool when filling out your FAFSA.

  • Bank statements and records of investments

  • Records of untaxed income

  • The names of up to 10 colleges you wish to apply to

To apply for federal student loans of any type, you will need to fill out a FAFSA online. All the information you put into the FAFSA application must be correct to get the best loan to suit your needs.

By filling out a FAFSA, you will also be applying for federal and state grants as well as work-study opportunities without an additional step. Your school(s) of choice will let you know what aid programs, grants, and loan options you qualify for before you accept any funds.

If you’re considering private student loans to cover additional college costs, be sure to shop around. Some financial institutions will offer better rates to loan borrowers than others.

Private Student Loan Requirements

  • Your social security number and proof of being a permanent resident

  • Enrollment in an eligible college program, either full-time or part-time

  • Your federal income tax returns and W-2s

  • The financial institution to run a credit check

  • A creditworthy cosigner if you do not have good credit

  • At least 18 years old with a high school diploma or GED

The last step when obtaining a private student loan is to decide if you want a fixed or variable interest rate.

Be cautious of variable interest rates, as they can start off lower than fixed rates but spike at any time. It is best to find the lowest fixed interest rate you can due to their predictability.

5 Student Loan Tips

1. Make sure all your income information is correct

After you fill out the FAFSA, you will get a Student Aid Report (SAR) within the next week. Go through this report thoroughly, as it contains all your FAFSA information.

There are simple instructions on the SAR to make any changes or corrections you need to before the information is processed. After processing, it is much more difficult for you to change your FAFSA information. You’ll need to make changes through your school’s financial aid office.

2. Compare all of your loan options

By filling out a FAFSA, you will know which type of federal student loans you qualify for and if you qualify for any federal grants. Knowing this information is incredibly beneficial when it comes to choosing your financial aid.

It is also worth your time to look into private student loans both online and from a local financial institution. A simple application on a website such as Credible can let you know the private loans you qualify for and their terms.

Each type of student loan will have a different amount and interest rate tied to it that you can review and compare. This way you can make the best choice for you as to where your money comes from.

3. Borrow only what you need

A wise student will create a college budget by looking at all their expenses. In fact, each school is required to provide an estimate to their students of how much college should cost each year. This number considers all costs including tuition, fees, room and board, and school supplies. It is best to look at your own costs though. Keep track of what you spend each semester and create your budget accordingly. Then borrow only the amount of money you need to pay for school. By taking out only what you need in student loans, you will have less to pay back in the future.

4. Consider working part-time

Having a part-time job in college can help with costs quite a bit. In fact, the vast majority of college students hold at least a part-time job while going to school.

A part-time job can be beneficial to college students in many ways. For one, it cuts down on the amount of student loans by covering some living costs as you go. Imagine not having to take out loans for food or housing—this could save you thousands of dollars in the long run.

College jobs also offer students a way to meet a group of people outside of campus life. This creates strong social networks and future references that can speak to your work ethic firsthand.

There are many different types of part-time jobs out there for college students. Many employers love to hire college students and are willing to work around their class schedules as well.

5. Pay back your interest as you go

With federally subsidized loans, you get a 6-month grace period after graduation before interest starts accruing. Any other loan type will accrue interest from the time you take out the loan. This means that your loan amount is getting bigger each month.

Consider making payments on your loan while you are in school. Try covering the interest being accrued each month. This amount will not be much but will save you lots of money in the long run.

Frequently Asked Questions about Student Loan Requirements

What are the income requirements for student loans?

The ability to get a federal student loan is not based on income alone. The federal government decides how much a student is eligible for by looking at the cost of attendance (COA) at their school compared to the expected family contribution (EFC).

The COA includes tuition, fees, room and board, as well as books and supplies—the total cost of college. The EFC is based on a complex formula that determines how much money your family will have to help pay for college based on all income and assets. It is not just all assets combined into one number.

To get the qualifying amount:

COA - EFC=Financial Need\text{COA - EFC} = \text{Financial Need}

For example, let’s say your COA is $20,000 and your predicted EFC is $14,000. You would qualify for $6,000 in financial aid to cover the difference.

What disqualifies you from getting a student loan?

Each semester, your school provides you with your academic standing. As long as you are making satisfactory academic progress toward graduation, you will continue to qualify for student loans.

A student can become disqualified from obtaining a federal or private student loan. If you don’t make monthly payments on an existing federal loan or are not making satisfactory academic progress, disqualification is possible.

Most student loans and all federal loans require at least half-time enrollment to qualify for financial aid. For Degrees+, students enrolled in at least two courses meet this criteria.

Do I get all the loan money at once?

No. When you qualify for a loan, your school gets the money and divides it up by semester.

After the school applies the funds to your account, you’ll get back anything left over. The loan funds given to you—called disbursements—are electronic and sent to your chosen bank account.

Can I accept only a part of the loan to avoid taking it all out?

Yes. Once a student qualifies for a student loan, the student must decide how much of the loan they need. This is done through the school’s financial aid office.

You can choose to take all the funds offered or a partial amount. Remember that this amount will be divided up by semester.

If you find that you took out too much and have a larger disbursement, you can always pay it back to the loan. Anything you pay while in school you will not have to pay back later.

Is anyone eligible for student loans?

As long as you are a U.S. citizen or eligible noncitizen, you meet the eligibility requirements for an education loan. It doesn’t matter if you are right out of high school or considering going back to school in your 30s, you can qualify for federal student loans.

Private student loans are also within reach of anyone, but if you have poor credit or no credit, you will have to obtain a co-signer. Be sure to look into a wide range of financial aid options and fill out a FAFSA to access federal loans before taking out any private loans.

How to Get Started

Student loans offer anyone the ability to go to college. While it is not ideal to take on debt to attend higher education, loans can be a helpful tool to cover some educational expenses.

Before considering student loans, think about:

  1. Will your degree help you get a high-paying job to pay off your loans?

  2. Which grants and scholarships do you qualify for?

  3. Can you find a college job to help cover expenses while in school?

  4. Is there a more affordable option to save money?

Consider looking into:

Knowing the answers to these questions will help you with your loan decision and how much money you need.

Another great option to consider is earning an associate degree through a partnership program between Outlier and Golden Gate University. The Degrees+ program allows students to earn their degree from home using Outlier’s award-winning and engaging online platform.

Since Degrees+ is offered at a fraction of the cost of a typical associate degree, you could be eligible for federal grants that would cover the entire cost.

By taking the time to fill out a FAFSA first, you will have the information you need before taking out any unnecessary student loans to help pay for school.

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