Here is How the Student Loan Process Works

Many students take help from student loans to pay for their higher education. The process, however, can be highly complex and must be fully understood before applying for the loan. Failing to understand the procedure can lead to mistakes that can cost heavily in the future.

In this article, we have broken down the personal student loan process into steps to help you make an informed financial decision.

Due Diligence

Before you apply for a private student loan, you need to understand the private lenders lending practices and explore all available options. Don’t just go with the first one you come across. Review all lenders and their service offerings before making a final decision. The options offered by the loan servicer should meet your requirements and lifestyle. You can also use one of the many available online tools to assess repayment options before applying for the loan. This will give you a fair idea about monthly instalments before you commit yourself to one.

2. Application

Once you have chosen the lender, it is now time to begin the official process by filling out the application form. While the information required by each lender may vary, certain fields remain the same such as contact information, date of birth, social security number, graduation date, school information, income information etc. Most private student loan applications can be filled online. But before you submit the application, it is important to thoroughly study the general disclosure statement that offer tentative details regarding the interest rate, repayment options etc.


After reviewing the disclosure statement, you can submit the application and wait for approval. Some lenders will take time to review your application before approval which may take a few days. However, there are also other lenders that offer instant decision. The lenders evaluate the applicant’s creditworthiness and income information, among other things, before approving or denying the application. In case the application is denied, the lender will send a letter explaining the reasons for denial. In that case, you can apply with a co-signer who has solid credit to get a loan approval. This co-signer takes responsibility of your loan in an event you fail to repay.


After the loan has been approved, the next step is to understand the loan terms and sign your acceptance. In some cases, your lender may be willing to offer flexible repayment terms allowing you to choose the one that fits your requirement. You may also be allowed to customize your loan to better align with your objectives, such as choosing the repayment plan and loan tenure. Once the loan terms have been finalized and accepted, the lender is obliged to share another disclosure but this time with specific information with regards to disbursement amount, loan fees, interest rates, and tenure. You should carefully read the disclosure statement before signing your acceptance. After you accept the loans terms, you will be required to submit the remaining documents to continue to the next step.

5. Loan Disbursement

Once your lender has worked with your school in certifying the loan, the next step will involve its disbursement. This is when your school will be paid by the lender to pay for your education and secure your admission. Private lenders pay the schools directly at the beginning of the semester. Once the loan has been disbursed, your lender will inform you about it. If you have applied to pay for two terms, then the money will be sent in two disbursements.

6. Repayment

Once the loan has been disbursed and the tuition fee has been paid, the final step in this process is for the student to repay the loan. When this step will be initiated depends on the repayment plan you chose at the time of loan application.

In most cases, private lenders try to offer all kinds of repayment plans to suit the borrower needs. This is why it is important to understand your own requirements carefully before you start the process. Some lenders will also give you an option to choose in-school repayment option that allows you to pay the loan simultaneously with your school so that you can reduce the financial burden once you get an actual job after graduation. You can also choose to wait until the end of your school to begin repayment. In case you choose deferment, you will be given a grace period after your graduation to look for a job before the repayment of the loan begins.

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