Student loans generally fall into two main categories: federal student loans and private student loans. All college students should fill out a FAFSA when they enroll in school, regardless of financial need. This is the first step to find out which federal student loans you qualify for (even if you decide not to borrow), and to see if you’re eligible for other forms of financial aid beyond loans.
Here are a few instances when you might need to look beyond federal loans and aid:
Your federal student loans & other aid doesn’t cover all your school costs
Federal loans come with limits, and for many students, federal student loans don’t cover their entire cost of attendance. They may be able to cover the difference through financial aid and/or scholarships, or they may need to turn to other options.
Private student loans are one option that can help some students & families get the extra money they need for college. Before you borrow, just make sure you’ve done the math and can expect the investment in your education to pay off.
You want to attend a summer session
Many students use their federal student loans and financial aid to cover fall and spring semesters and may find themselves short for summer session. There can be lots of benefits to taking a summer session, including the possibility of graduating faster and starting to earn more money sooner. If you’ve exhausted all of your other financing for the academic year, but taking a summer session would add value for you, a private student loan might be the right answer.
Your expenses suddenly change
A lot can happen during your time in college. Your current federal loans and aid may be working out just fine, but sudden life changes unexpectedly make it difficult to pay for college while taking care of your other bills. For example, your class schedule could limit your job options, or your roommate might suddenly decide to move out, leaving you with the other half of the housing expenses. Before you turn to high interest credit cards, make sure you’ve considered all your options, including private student loans.
Remember, student loans can be used for more than just tuition and fees. Your school considers related expenses, like room and board, transportation, and supplies into the cost of attendance, and student loans can be used to cover those related costs.
You have a cosigner who can help you qualify
Most students need a cosigner to qualify for a private student loan, because they don’t have enough income or sufficient credit history to qualify on their own. Having a cosigner with good credit can help you qualify for the loan, and you’ll usually get a lower interest rate. Your cosigner is taking equal responsibility to repay the loan if you can’t, and the loan will appear on your cosigner’s credit report (as well as yours), so you want to find a cosigner who can handle the financial responsibility.