TUN sits down with Cathy Mueller, the executive director of Mapping Your Future, to discuss how you can get a student loan.

TUN: Cathy, thanks so much for joining us. 

MUELLER: Thank you. 

So, there are two types of student loans, which are federal loans and private loans. Let’s start with federal student loans. Can you explain what those are?

Sure. So, federal student loans are loans that are administered by the federal government. These loans help students pay for the cost of an education. It could be an undergrad student or a grad student. 

In addition, there are Parent Plus loans available to help parents pay for the cost of an education as well. The most common federal loan is the Direct Loan program, and that’s what most students receive. 

As long as students meet the basic eligibility requirements and they’re attending institutions that participate in the federal financial aid program, they can receive federal student loans. 

One of the great things about federal student loans is there’s no credit check, so a student doesn’t have to prove creditworthiness in order to receive a federal student loan.

Great. Can you go into a little bit more detail about how students get federal student loans?

The first step for any student to get a federal student loan is to complete the Free Application for Federal Student Aid. It’s also known as the FAFSA. It’s important to do that because not only are they applying for federal student loans, or at least determining their eligibility for federal student loans, they are also determining their eligibility for any need-based aid, and they certainly want to be considered for that as well as student loans. 

In addition to completing the FAFSA, there may be a loan application, and there will be a promissory note that the student has to complete in order to receive federal student loans. 

Finally, the school will ask the student to complete an entrance counseling session. That entrance counseling session will explain all about the federal student loan. It’ll have the terms and conditions and maybe even help them with budgeting as well. It’s important that they complete that. The school will want to have them complete that before they disburse the loan. 

Great. How much money can students borrow in federal student loans? Is the amount of money that they borrow up to them?

It’s not really up to students in terms of the limits. But students can always borrow less than what they’re allowed to borrow so, in that sense, it could be up to the student. But the limits vary based on the year that the student is in school, as well as whether or not they’re a dependent or an independent student. 

Independent students can borrow a little bit more because they are considered independent, i.e., they don’t have parents to rely on to help them pay for the cost of their education. 

For students starting their undergraduate education, the amounts vary anywhere from $5,500 at the beginning of an undergrad dependent student, all the way up to $12,500 annually. 

There are also aggregate loan limits. For example, a dependent student can’t borrow more than $31,000 in federal student loans over the lifetime of their undergrad education. 

Great. So, when do students have to start paying back their federal student loans?

Anytime a student graduates, drops below half-time enrollment or withdraws, that triggers the beginning of a grace period. Students have a six-month grace period before they need to begin paying back their student loans. They will get notification from a federal loan servicer that they’re in their grace period and they’ll get the date that that repayment will begin. 

So, if students have a grace period ending and they feel like they can’t repay their loans because perhaps they haven’t found a job yet or they’re not making the amount of money they need to make in order to make their student loan payments, they should contact their servicer and see what options are available. With the federal student loan program, there are some repayment options that will help spread out their payments or lower their payments. 

Great. Students also have the option to take out private loans. If a student wants to take out a private student loan, how can that student do that? 

I recommend that students contact the financial aid offices at their schools, if they are considering a private loan. That’s certainly something they should do.

They can also contact their own lenders. They don’t have to use any lenders on a lender list at a school. They can contact their own lenders, but they’ll have to check with their lenders to make sure they’re working with that institution as well. 

There will be other loan applications for students if they are considering a private loan. In addition, there will be a credit check. Unlike federal student loans, students will have to prove creditworthiness. That’s sometimes a challenge for students. So, what they may have to do is have a cosigner. 

Basically, a cosigner guarantees that they’re going to pay the loan if, for some reason, the student cannot repay it. So, it’s important to remember that there are a lot of differences between federal student loans and private student loans. 

Great. So, when would you advise students to take out private student loans? 

So, I would advise students to only consider private student loans after they’ve exhausted all other sources of what we call “free funding,” which are grants and scholarships, and also after they have exhausted all of their federal loan eligibility. 

Also, I would recommend that they look at their state government. There are state governments out there that have state student loan programs that offer very attractive benefits for students as well that are very comparable to the federal student loan program. So, they might want to make sure they’re taking advantage of all of those programs first before they consider any private student loans.

Great. Thanks, Cathy, for joining us today.

Thank you. 

This interview has been edited for clarity.