In 2024, the average cost of college climbed to a whopping $38,270 per year. This annual price tag includes tuition, fees, room and board, supplies, books, and essential living expenses. Given that most people can’t afford to pay upwards of $150,000 out of pocket for four years of higher education, many turn to loans to help finance the cost. Different loans have different eligibility requirements, however.
Generally, federal student loans are easier to get, as you simply need to be a U.S. citizen and complete the Free Application for Federal Student Aid (FAFSA) to qualify. But there are some downsides to be aware of with federal student loans, and you might need private student loans to help offset your costs further. If you’re wondering how to get approved for a student loan, here’s what to know.
How Do Federal Student Loans Work?
You can access federal student aid by completing the FAFSA form, which requires you to input both personal and financial information. Your colleges of choice will then review your FAFSA form and come up with an aid package that could include scholarships, grants, and federal student loans.
Scholarships and grants don’t need to be repaid, but loans do. The bright side is that federal student loans tend to have relatively low rates. But the downside is that you can only borrow a set limit with federal student loans. Thus, you may have to look toward private student loans to fill the gap.
Federal Student Loan Eligibility Requirements
Because of their low rates and flexible eligibility requirements, federal student loans are a good starting point for borrowers who need to finance their education. Eligibility requirements for federal loans include:
- U.S. citizen or eligible non-citizen: You’ll need to be a citizen of the U.S. or an eligible non-citizen.
- Valid Social Security number: You’ll also need a valid Social Security number, with some exceptions for students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau.
- Demonstrate financial need: You’ll need to demonstrate financial need to qualify for subsidized federal student loans. Unsubsidized federal student loans are not need-based.
- Show you’re qualified to continue your education: You must have a high school diploma, GED or show that your homeschool experience is in line with state law.
- Be accepted (or enrolled) in an eligible program: To receive federal student loans, you need to be enrolled at least half-time in an eligible degree program at an eligible school.
- Fill out the Free Application for Federal Student Aid (FAFSA): You need to complete the FAFSA application, provide consent to have them transfer your federal tax information into the form, and sign the certification statement at the end, affirming that you’re not in default of student loans and that you’ll use the money for education.
- Demonstrate academic progress: You’ll need to demonstrate satisfactory academic progress in order to stay eligible for federal loans.
Unsubsidized vs. Subsidized Student Loans
Eligibility requirements for federal student loans differ based on whether a loan is an unsubsidized vs. subsidized student loan. The government covers your interest while you’re in school with a subsidized student loan, while unsubsidized student loans accrue interest while you are in school.
To be eligible for a subsidized student loan, you must demonstrate financial need. The financial information you share on your FAFSA will be used to determine if you meet the qualifying requirements for a subsidized federal student loan. You don’t need to demonstrate financial need to receive an unsubsidized student loan.
How Do Private Student Loans Work?
It’s possible you may still have a funding gap once you reach your federal student loan maximum. In this case, private student loans could help you get the money you need. Private lenders that aren’t affiliated with the U.S. Department of Education offer private student loans, which may cover up to the full cost of college attendance.
Private student loans may have certain benefits. They offer competitive rates for those with excellent credit. Additionally, private student loan limits are often higher than federal student loan limits, and you can apply for private loans at any time rather than waiting for the new FAFSA deadline. However, private lenders also have more qualifying requirements for borrowers, which we’ll discuss shortly. Thus, private student loans could be harder to get if you’re applying on your own.
Private Student Loan Eligibility Requirements
Private student loan requirements are a little more stringent than those of federal student loans. Here’s what you can expect:
- Other requirements: You may also need to provide documentation of your U.S. citizenship or residency status and current employment, as well as proof of enrollment in a qualified institution of higher learning.
- Income requirements: You need to demonstrate that you can repay the student loan.
- Credit criteria: Private lenders will generally check your credit. Each lender has its own credit score requirements.
- Age requirements: You might need to be 19 or even 21 to take out a private student loan in some states, even though most states allow borrowing at age 18.
How to Improve Your Chances of Qualifying for Private Student Loans
Federal student loans don’t come with strict credit score and income requirements, making them easier to qualify for than private loans. Even though private student loan requirements may be harder to meet, these steps can help improve your chances of approval:
1) Plan to maintain a job during college. If you have a current job, showing your income with the intent to continue the job during college could help you qualify for private student loans.
2) Boost your credit score. Establish credit with the help of a credit card or other loan (paid off as soon as possible) to help meet the credit requirements.
3) Find a cosigner. Applying for a loan with a trusted family member or friend who has good credit may increase your chances of approval. Remember that your cosigner will be responsible for your payments if you fall behind. Note that some lenders offer cosigner releases, or you can refinance down the line to have your cosigner removed from your loan.
Apply for Student Loans With ELFI
When comparing federal vs. private student loans, carefully consider your situation. In general, federal student loans are a good starting point. But as long as you meet the qualifications, it’s possible to get both types of loans if needed.
ELFI offers undergraduate student loans and graduate student loans if you need to close a college funding gap. Use ELFI’s student loan payment calculator to see what your payments could look like, and prequalify for education funding without impacting your credit.
