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How to Apply for a Student Loan

What to Know Before Applying for a Loan

Applying for a student loan can feel like a monumental task when first getting started, but it's actually a breeze once you've done your homework. The important thing is to start early. The deadline for submitting the Free Application for Federal Student Aid (FAFSA) is usually midnight on June 30 for the academic year that begins in August or September [source: FAFSA]. However, the deadline for your state or your school may be much earlier, so apply as soon as you can. Applications are accepted beginning in January.

Before applying for a student loan, it is important to fully understand what you're getting into. Most student borrowers have never had a loan before, so this is important. Like car loans or home mortgages, student loans must be paid back with interest. First payments are usually required six months after graduation, whether or not you've landed your dream job.

As explained earlier, unsubsidized loans begin accruing interest while you're in school. For this reason, the interest rate on an unsubsidized loan should be a key factor in your financial planning. For the academic year that began in summer 2008, the interest rate was 6.8 percent for an unsubsidized Stafford Loan [source: Stafford Loans]. PLUS loans tend to carry higher rates of interest.

There are also fees for most student loans. For example, the loan origination fee was 2percent for subsidized and unsubsidized Direct Loans in 2008 and 2009 [source: Direct Loans]. For PLUS Loans, it was 4percent. Fees for FFEL Loans are set by individual lenders, but tend to be comparable to Direct Loans. Federal Perkins Loans are an exception; students pay no fee for this loan.

This is worth saying again -- because student loans must be paid back, it is very important that you understand all the terms and conditions associated with each loan type before you borrow. In many cases, student loan debt can total well into the six-figure range, especially for graduate students.