I’m just a … loan

Barbara

You know what I miss about my childhood?

Saturday morning cartoons.

The Muppet Babies, Garfield and Friends, and Teenage Mutant Ninja Turtles were up there on my list of must-watch shows. But my favorite—being the self-proclaimed knowledge nerd that I am—was "Schoolhouse Rock!"  I just couldn't get enough of that poor little bill on Capitol Hill .

Wouldn't it be nice if there were a similar song for young adults explaining student loans from start to finish? Don't worry, you're not about to be subjected to any of my (non-existent) singing and composing skills. But it might come in handy to have an overview of the process—application through disbursement—before you dig in.

So, here's my little ditty, featuring Betty Borrower, who is applying for a Federal Stafford Loan :

Our saga begins with the Free Application for Federal Student Aid—this year, the paper form is in a lovely shade of goldenrod—or the FAFSA online . Betty Borrower completes and files her FAFSA in January and then sits back and waits for her school to send an award letter , which outlines the aid for which she is eligible.

As a first-year student, Betty finds out she's able to get a $2,625 Unsubsidized Stafford Loan. Now it's time for her to pick a lender. Betty decides to get some advice from the financial aid office. After talking about her options with a financial aid counselor, she is directed to the school's lender list. A lender list is a set of lenders that your school has dealt with in the past and other students have been happy with. (This  is an example of a list at the University of Texas at Austin.)

Once Betty chooses her lender, she'll need to fill out the actual loan application, which can be found in paper or online. Being a tech-savvy college student, she decides to apply online. After Betty enters all of her information, the application goes to the lender for approval.

Next, the lender works with the guarantor to get a guarantee for Betty's loan. A guarantor is a state or private nonprofit organization that agrees to reimburse Betty's lender if she does not honor her repayment obligation. Think of it as “insurance” for the lender.

Finally, Betty is just one step away from her money! The loan is guaranteed, and voilà, the lender schedules Betty's disbursement to her school. Her attendance is funded with money that Betty will pay back to her lender. She'll get half her money for the fall semester and the other half at the beginning of the spring semester, which is pretty typical. Now, she just has to worry about studying for her classes!

All right, even though it doesn't rhyme, and there aren't any animated dancing loan applications, that's the basic overview. Let me know if I need to elaborate—again, it won't be done in song, so no worries. :)