Student loan

DEFINITION

A loan is a debt, which entails the repartition of financial assets over time, between the lender and the borrower. The borrower receives an amount of money from the lender, which should be paid back to the lender. The cost of the service depends on interest on the debt.

Student loan is a loan offered to students to assist in payment of professional education. It doesn’t matter if you are graduate or undergraduate student. You can borrow money in all cases. Parents may also borrow to pay the cost of education for dependent undergraduate students. Maximum loan amounts depend on the student's year in college. These loans usually carry lower interests than other loans and are usually offered by the government. Often they are supplemented by student grants which do not have to be repaid.

THE POINT

The cost of professional education rises every year that is why today, student loans are a fact of life.

The key role belongs to the government as in any government sponsored program. While included in the term "financial aid" professional education loans differ from scholarships and grants in that they must be paid back. Student loans provide a variety of postponement options and extended repayment terms and do not require credit checks or collateral.

The federal funds for education are limited and government and private lenders give the students flexibility in choosing the type of college that is right for them.

CATEGORIES OF STUDENT LOANS

There are different types of student loans that are available. They include:

Stafford Loans:

Stafford Loans are issued by the federal government. They have a lower interest rate than other types of loans. There are either subsidized and/or unsubsidized Stafford Loans.

When you take subsidized loan, the government pays your interest for you while you are studying. Subsidized loans are based on financial need.

With unsubsidized loans, you will be charged interest while you are studying, but do not have to begin paying the loan until you graduate college. Unsubsidized loans are available without showing financial need. You must begin paying back these loans 6 months after you graduate.

Direct Student Loans (Perkins Loans):
Perkins loans are given to students based on extreme financial need, and usually have very low interest rates. The interest rate is lower than a Stafford. Since the college already has been given its Perkins funds, it simply transfers the loan to your student account as a credit. You have to begin paying between 6 and 9 months after you graduate.

Subsidized Direct Loans:

Direct loans are the same as a Stafford except that the federal government is the lender.

PLUS Loans:

This is a parent loan, offered by the federal government that is unrelated to need. Generally, parents can borrow up to the total cost of education, minus any aid received. These loans are given regardless of your income, but lenders will consider your credit history.

The interest is low on this type of loan and repayment usually begins within 60-90 days after full disbursement of the loan, or after the student graduates.

Private or Alternative Loans:

Private education loans are available to both parents and students, at higher interest rates than the federal loans. In almost all cases, a credit check and approval is required.

Banks and private lenders provide student loans at relatively low interest rates.

You can find lots of private lenders online.

WHAT TO DO TO GET A LOAN

At first you should fill out a Free Application for Federal Student Aid (FAFSA) form. FAFSA requires detailed data about your own and your parents’ income, your tax status, age, and the degree you want to get. The government will use that information to define your eligibility for federal loans.

This form can be filled out and submitted both as a regular paper form and online.

If you want to get a private loan you can find all the information about private lenders online.

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