A lot of you have been asking about what are the essential questions to ask while applying for a  student loan. It is important to be aware of the details of the loan and its repayment before signing on the dotted line. This decision can affect you even while you are still in the program if your loan entails you having to pay interest or the principal + interest before you graduate.

Here are the most important items you should understand and inquire about when taking out a loan for college:

1. Is this a federal student loan or private student loan? – I have written another post on the differences between the two (read it here).
2. Who is the servicer? – is it a bank, credit union or online lender? Is the lender approved by the University you have been accepted to? Most lenders have a list on their website of Universities that have a history of loans with them. This makes the process easier and the chances of getting accepted for a loan is increased. The top private student loan providers are Citizens Bank, Discover, Navient, PNC Bank, Sallie Mae and Wells Fargo as well as online lenders including SoFi, CommonBond and College Ave.
3. Is there a cosigner on the loan? – All international students without a US green card/citizenship will need a co-signer on the loan. The co-signer is usually a family member/friend that has good credit history as they will be part of the loan until it is paid off or until the lender is able to release the cosigner (usually when the foreign student gets a permanent resident status in the US). The cosigner is responsible for the loan if the student defaults on the payments.
4. What is the interest rate? – Interest rates will obviously determine your monthly payments as well as the total amount you will end up paying. Interest varies so getting quotes from 2-3 lenders will give you a better idea of what is available. The cosigner’s credit history and score play a major role in the interest rate determined for your loan.
5. Is the interest rate fixed or variable? – Fixed rates will mean you will pay a fixed monthly amount for the duration of your loan period whereas variable rates can mean the payments may be lower/higher depending on market rates (Variable rates can change monthly or annually until your loan is paid off). In the end, you may end up paying a lower total amount if the market rates ended up being favorable for you. Federal loans are normally fixed rate while private loans are usually variable rate.
6. When are you required to make payments—while in school or after? – Federal student loans generally have a grace period of six months, meaning your first payment comes due six months after you graduate, leave school or drop below half-time enrollment. Some grace periods are nine months. Private lenders may not have a grace period at all, so be sure to ask if that is an option. If you have a private lender, you may have different options such that you can pay
   1. nothing while in school and the loan amount accrues interest until you start paying it monthly (usually 6 months after you graduate)
   2. just the monthly interest or a fixed amount of $25 while in school
   3. both a portion of the principal and the monthly interest while in school
   4. deferred payment until 6 months after graduation.
7. How much is your monthly student loan payment and what is the duration of the loan? – Monthly payments are dependent on the principal amount, interest rate and duration of the loan. There are income-driven plans where the monthly payments will depend on how much money you make. It is better you know the monthly payment value in advance because you can decide if ultimately that will be a number you can pay back comfortably while working right out of dental school. If the value seems too high to cope with your projected (future) entry-level salary, then you might have to rethink the loan and possibly the dental program you are accepting.
8. What is the penalty for late payments? – Most lenders give a 2-week leniency (differs from lender to lender) before you are deemed as being late on your loan. Your co-signer may be contacted or notified and their credit score/history could be seriously hampered with a single late payment. Some late payments can stay on your credit history for 7 years and affect your future acceptance of credit cards, loans etc. So make sure you know about the late payment terms and be diligent about monthly payments.
9. What kind of repayment options are made available to borrowers? – This depends on the type of loans you have. Private student loan repayment tends to follow a typical installment loan repayment structure, in which you make monthly payments for a fixed loan term. Federal student loans offer more options – the default is fixed monthly payments for 10 years. If you want a lower monthly payment when you start out, you can change your repayment plan (income driven/graduated repayment or extended repayment) at any time for free, though the change may not take effect immediately. Students also need to see if a lender will allow for any kind of slack in difficult financial situations during repayment such as when you lose a job/fall sick or in general cannot keep up with the payments. There are options to place loan payments into a deferment or forbearance for temporary relief (Under deferment, your loan payments are postponed and no interest accrues whereas in forbearance your interest accrues to the principal and so you may still have to pay the monthly interest charges). If the lender does allow for deferment or forbearance, be sure to see if there are consequences, like increases in the interest rate.  Ask about any hidden fees or a penalty for repayment ahead of the loan term.
10. How are loan funds disbursed – to you or the school? – If the funds are released to you, then you are responsible for paying the tuition and managing monthly expenses from the given amount. If the funds are disbursed directly to the school, the tuition is automatically deducted and if you have applied for additional funds to cover the living expenses, this will be given to you by the Financial Aid office.
11. How can I make my loans more affordable? – Among the benefits previously noted, enrolling in automatic payments usually gets you a 0.25% discount on your interest rate. Private loan refinancing could also help you save money if you have good credit and can qualify for a lower interest rate. Additionally, changing your repayment plan to a longer term or an income-driven plan can lower your monthly payments.
12. How do I apply for a loan and how long does it take to get approved? – To apply for federal student loans, the first thing you need to do is complete a FAFSA application. For private loans, you must first decide on which lender to go with. The school Financial Aid office can recommend the most common lenders they deal with. You can apply online, in person at a branch or you will be mailed the physical application. Documents needed from you include the completed loan application and your current I-94 (even if your I-94 expires in 6 months it is ok as long as it is valid at the time you apply for the loan). The cosigner will need to furnish a copy of green card, social security number and pay stubs (preferably less than 30 days old). Loan approval and disbursement is dependent on individual lenders and can take from 2 weeks to 3 months. Fresh applications are required every year as the loan amount is only for each year of study.

These are some of the major points to keep in mind while applying for student loans. Please let me know in the comments if there are any other specifics to be aware of.