Student loans are a necessity for many college students. With tuition costs increasing, you may be looking for a way to cover the expenses of your education while simultaneously working towards a degree. The first step in finding the right loan is understanding how it works and if you meet eligibility criteria.
The process can be very complicated with lenders and different aspects of repayment, but this article will provide basic insight into the process so that you can better prepare yourself.
Student loans are divided into two categories: federal student loans and private student loans. Federal student loans come under Title IV of the Higher Education Act (HEA) of 1965, whereby the United States Department of Education (USDE) issues provider licenses and operates the loan program. The HEA also ensures that students stuck with debt after graduation will be eligible to work in certain fields, such as medicine. This federal agency is responsible for providing students with money to pay off their debts during their repayment period.
Private loans, however, are not issued under the HEA. These loans are offered by private lenders who have their own eligibility criteria and repayment criteria. Students should research each loan carefully to ensure they understand both aspects of the loan before signing any paperwork.
Most students will be eligible for a federally-issued loan as long as they have a satisfactory credit score, demonstrate financial need and meet other requirements set forth by the USDE and other agencies.
The beginning credit score for an undergraduate student is 500. Students who have less than six months of income history may be eligible for more generous loan limits if they meet certain financial criteria, including:
Required documentation of parental income and assets
A down payment or a letter of credit from a person or organization willing to co-sign on the loan
Student loan eligibility may also vary depending on whether you are:
Submitting an application for a federal direct loan program or applying under a private loan program. In general, students must be enrolled at least half-time in order to qualify for loans, with the exception of students in a grace period following graduation and parents who are recipients of certain grants or loans.