If you’re in college-funding “crunch mode” right now, you’re not alone. A recent study reveals that late spring is when most parents feel the pressure to get their children’s college funding plans tied up for the fall.
In our survey of more than 2,000 parents, 51% reported they plan on finalizing college funding by June. That includes securing private student loans.
Are you on track? Let us break down what you need to know to nail down college funding now.
Step 1: Know how much money you need
By now, your child has probably already applied for FAFSA, or the Free Application for Federal Student Aid. (If your child hasn’t applied yet, use our handy guide to help work through the forms quickly.)
Along with your child's college acceptance letters, they should've received a financial aid letter. In general this letter will break down how much school will cost you, the kind and size of your financial aid package, and the remaining gap in tuition costs you'll need to meet to attend that school. The letters won't look the same, but will summarize the same general information:
- The school's cost of attendance (COA)
- Grants
- Scholarship(s) awarded by the school
- Federal student loans
- Work-study
- Expected Family Contribution (EFC), and
- The remaining funding gap
See also: How to Read Your Financial Aid Award Letter: 5 Examples
Take that financial aid letter and sit down with our free College Cost Calculator.
This tool allows you to separate the free money (scholarships, grants, etc) from the money you'd need to pay (federal and private loans). You can use this tool to compare financial aid award letters from different schools, and ultimately understand your tuition gap at each school —and where loans may be needed to bridge the difference.
Step 2: Compare loans
The next thing you’ll want to do is evaluate a few different student loan options. You’ll want to consider:
- The reputation of the lender
- Interest rates
- Fees
- Penalties for early payoff, or late or missed payments
- Repayment terms and forbearance options
As a starting point, here’s how some of our highly-vetted and trusted lending partners stack up in regards to loan types, terms, and interest rates (APR).
You’ll also want to consider repayment options. Many lenders allow a variety of payment options, typically including:
- Making full payments while the student is in school
- Making interest-only payments while the student is in school, or
- Deferring all payments until the student is out of school
Keep in mind that with any loan, the faster you can pay it off, the more money you’ll save. That’s why it’s wise to make full payments plus interest while the child is in school, if that’s possible. If not, making interest-only payments is still a smart option. Doing so will keep interest from capitalizing on the account. Capitalizing is when accrued interest is added to the principal loan amount, causing the borrower to have to pay interest on interest.
In a nutshell: Deferring payments may seem like a good idea in the short-term as a way to conserve cash-in-hand. However, in the long run, capitalized interest could result in higher payments that may be difficult to keep up with.
Here are some of the payment options offered by our preferred lenders:
Pay now or later: Make interest payments, pay a fixed $25 payment, or defer payments until after school.
Flat payment (in-school), full (principal & interest), deferred, and interest-only
Full (principal & interest), deferred, interest-only, immediate repayment10
See all lender options here.
Step 3: Apply for a loan
Before applying for a private student loan, it’s important to consider whether you plan on cosigning the loan for your child or loved one. Keep in mind, few students have the credit history to qualify for a loan on their own.
In any case, applying with a cosigner is likely to result in lower interest rates. Even a small decrease in interest rates can yield substantial savings over the life of a loan.
Many lenders now offer online loan applications. If you have the required paperwork on hand, you can often get through the entire application in about 15 minutes.
Assuming that you’re applying as a cosigner, you’ll want to have the following info at the ready:
- Contact info for yourself and the student
- Dates of birth for yourself and the student
- Name of the school
- Major
- Social security numbers for yourself and the student
- Your financial information, including a recent pay stub or other proof of income
- Proof of mortgage or rental payment amounts
- Contact info for your employer (if applicable)
- The financial aid award letter from the school your child plans to attend
- The total cost of attendance
- Total financial aid offered to the student
- Anticipated graduation date
- A personal reference if a student is applying without a cosigner
Some lenders return approvals in as little as three minutes. However, some may ask you to supply additional information. In those cases, expect approval notification within a few days.
Get ready, get set, get funded
If you’re ready to move ahead with a private student loan, we strongly recommended checking out our lending partners. We've vetted these lenders for financial solvency, reputable lending practices, competitive rates, and customer responsiveness.
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