How to get a student loan absolutely the right way
Step 1 – Look into Federal loans: Complete the Free Application for Federal Student Aid (FAFSA) at FAFSA.gov.
Step 2 – See if you qualify for Subsidized loans:
Step 3 – Look into Private loans:
Dash shares that most undergraduates can’t qualify for a private student loan on their own because they don’t have much of a credit or earnings history. They’ll typically need to apply with a cosigner, like a parent, relative or friend, who agrees to take on the responsibility of repaying the loan if the student fails to make the payments.
Step 4 – and only if absolutely necessary – Look into Parent PLUS loans:
Parent PLUS loans should only be considered after all other options are exhausted. This is because Parent PLUS loans are the riskiest federal student loans. Not only do they carry the highest interest rates of all federal loans, PLUS loans carry a 4.3 percent up-front disbursement fee. This has the same effect as adding a full percentage point to the annual percentage rate (APR). Depending on the repayment plan you choose, the APR on PLUS loans can end up around 8 percent.
On top of that, Parent PLUS loans also offer the least flexible repayment options. Currently, millions of student loan borrowers are enrolled in income-driven repayment programs that lower their monthly payments. But the only program like that available to parents who consolidate their PLUS loans — the Income Contingent Repayment (ICR) — is not as generous as more popular plans like IBR and REPAYE.
On the upside, unlike private lenders, the federal government does not evaluate the borrower’s ability to repay student loans so it can be a little easier to get them. For borrowers taking out PLUS loans, only a basic credit check is performed. So, in short, you won’t be turned down for a PLUS loan unless you have adverse credit history (such as bills that are more than 90 days overdue, or a bankruptcy or foreclosure). On the downside, without repayment ability being evaluated, it’s easy for parents to get in over their heads with PLUS loans.