Student Loan Eligibility: What You Need to Know

Surviving college admissions is no easy feat. But navigating the steps that go into financial aid can take the entire higher-ed process to a whole different level.

In this article, we'll answer some of most commonly asked questions about federal and private student loans.

Federal student loans

What is the maximum income to qualify for financial aid?

If there’s one question about the Free Application for Federal Student Aid (FAFSA) that is answered incorrectly more than others, it’s this one. 

Contrary to what you may think, there are no income requirements or caps to the amount of money you report to qualify for federal student aid. 

What does matter is your expected family contribution or EFC. This is the minimum amount you're expected to pay toward the cost of college. The EFC calculation is primarily based on the income and assets of parents and students. To determine need-based aid, your EFC is subtracted from the college’s total cost of attendance. 

If you don't qualify for need-based financial aid, you can still qualify for other non-need-based federal aid.

How do you get a federal student loan?

The first step in getting a federal student loan is to fill out and submit the FAFSA.

Even though the FAFSA is something you fill out once every school year, know that there are federal and state deadlines, and that your college may also have its own deadline. If all three (federal, state, and school) have different deadlines, make sure to file your FAFSA by the first deadline posted. Check the FAFSA website for more information.

If you’re looking at the 2018-2019 FAFSA (which corresponds to the 2018-2019 school year), the application window opened on October 1, 2017, and runs until June 30, 2019.

Once you submit the FAFSA, the college you plan on attending will send you a financial aid offer, which may include federal student loans. You can choose to accept all, some, or none of the aid you are eligible for. 

After determining how much money you need to cover college costs, you will send back the signed award letter indicating the amount you are accepting. 

Before you receive your funds, you will be required to complete entrance counseling and sign a Mastery Promissory Note, agreeing to the terms of the loan.

When should you get a federal student loan?

You should accept federal student loan dollars only after you've exhausted all your sources of "free money" from grants and scholarships. Federal student loans are generally offered at a lower interest rate than private loans. They also come with helpful benefits, such as income-driven repayment plans. 

When considering federal loans, accept all subsidized loans first, followed by unsubsidized loans. 

Keep in mind that another alternative to accepting loans may be finding ways to make college more affordable by attending a community college, living at home, or going part-time. 

You should fill out the FAFSA regardless of your family's financial situation, because many schools use the information you provide to determine other kinds of financial aid.

Are federal student loans hard to get? 

The short answer: no. However, it's important to keep in mind that there are different kinds of federal student loans.

If your EFC demonstrates financial need, you may be able to qualify for need-based aid. This includes grants, work-study, and subsidized loans. 

But if your EFC shows you can cover the entire cost of college, you will not qualify for need-based aid. However, you can still take advantage of unsubsidized loans through the federal government. 

Eligibility for both need-based and non-need-based federal student loans is also based on other criteria such as your citizenship status, your enrollment in an eligible school, and whether you're enrolled in school at least part-time.

What is the maximum amount of federal student loans you can get? 

There are yearly and aggregate (total) caps on the amount of subsidized and unsubsidized student loans you can get.

The total limit for dependent undergraduates is $31,000. For independent undergraduates, the maximum amount of  is $57,500. For both independent and dependent undergrads, no more than $23,000 of the total amount can be in subsidized loans. 

The maximum increases to $138,500 for graduate school. No more than $65,500 of this amount can be in subsidized loans. 

The Perkins Loan, which is a school-based loan program for students with financial need, also has maximum borrowing limits. The aggregate cap for undergraduate students is $27,500, and the cap for graduate students is $60,000. 

How much money can a first-year college student borrow in federal loans?

First-year dependent college students can borrow $5,500, and independent students can borrow $9,500. For both, no more than $3,500 of the total yearly amount may be in subsidized loans.

Yearly amounts increase as your progress in school. See loan limits here.

Private student loans

How do you get a private student loan?

Private student loans are offered by banks and independent lending institutions. Many banks and private lenders offer an online application that can render a decision about a conditional loan approval within minutes.

If you're an undergraduate student, you'll likely need a cosigner to qualify for a private student loan. 

When should you get a private student loan?

If you’ve exhausted all of the federal student loan, grant, and scholarship options, it may be time to look into applying for a private student loan. If you qualify, the money you receive from a private student loan can help fill any financial gaps you have.

Are private student loans hard to get? 

Private student loans are not hard to get if you can prove your creditworthiness or apply with a cosigner. Lenders will use the financial information you provide to determine your interest rate. 

More than likely, you will need to find a credit-worthy cosigner to apply with you. That’s because most college students can’t prove they have sufficient income, employment, and credit history to qualify on their own. 

Additionally, the lender may require proof of citizenship,proof of enrollment in an eligible school, information about tuition and fees, and an estimate of the aid you are already approved to receive. 

What is the maximum amount of private student loans you can get? 

Many lenders will limit the yearly amount you can borrow based on your total cost of attendance minus financial aid.

In other words, they will offer financing up to 100% of the amount you still need after federal aid is factored in. Most private student loans can be used for tuition, housing, books, fees, living expenses, or other educational expenses.

How much money can a first-year college student borrow in private student loans?

Unlike the federal student loan program, private lenders don’t typically determine loam limits based on your year in school. 

If you are interested in learning more about private student loans, check out our picks for the The Best Private Student Loans of 2018.