4 Top Student Loan Application Errors

Filling out a student loan application is a step that will affect your financial situation for years to come. There is more to applying for a loan than simply answering the questions. You will need to understand the options before you, the sources you are applying to and the long-term consequences of your application in order to successfully apply for the best loan you can achieve. 

#1 Not Researching Federal Options

Before you apply for any loan, you owe it to yourself to thoroughly research all loan options. In particular, you should consider federal options. There are few government loan types that are truly flexible and beneficial across the board. Federal student loans, however, really offer the best of both worlds. You will achieve low interest rates while retaining options in the future. When you fill out a federal application, consider doing so independent of your parents or providers. This will make you eligible for a lower interest rate and higher limit. If you are not receiving help from another person to pay for college, then you should receive the benefits of your independence.

#2 Failing to Understand Education Costs

You will need to be aware of the limits you require in order to submit a successful application. Lenders will not simply ask you how much money you would like, as they perhaps would with a credit card application. Instead, they will base the size of the loan on the educational costs to attend your college or university of choice. If you have not yet selected the school you will be attending, you may only be able to achieve an approximate pre-approval limit until the lender can verify the costs. This is particularly true of federal programs that do not support living expense loans.

#3 Failing to Reapply Each Term

If you have a federal loan, you will need to reapply each term for the financing. The same is true for the vast majority of private loans. It is rare for a lender to agree to a two or four-year funding arrangement to pay your college expense up front. Instead, you will have to submit an application including expenses for each term or each year to the lender. You will then receive funds as they are needed to pay for your current term. Using a personal loan instead of a dedicated student loan is the predominant method for getting the lump sum agreement up front, but this method is more expensive and less flexible.

#4 Opting for Long Loan Terms

When you apply, you can choose an approximate loan term based on the payment plan you are asking of the lender. You can lower monthly payments by opting for a longer loan. However, failing to make regular payments in the beginning, even while you still attend school, means your interest will compound more frequently and your loan will be very pricy. Whenever possible, take paths that allow you to have a shorter student loan. If this means electing a work-study path, you will find the financial benefits of this option are worth the extra effort.

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