Student Loans

Very few students are able to afford college without receiving some sort of financial aid. Many students receive financial aid in the form of educational loans. Educational loans or student loans are a type of financial aid that students must repay, with interest, when they have completed college.

There are three types of these educational loans: student loans, parent loans, and private student loans. There is also a fourth type that is used less often called the consolidation loan.

Student loans are loans provided by the government. Student loans are renowned for their low interest rates. Many students who would not be able to qualify for other types of loans are able to get student loans because they do not require credit checks or collateral. Students are also able to apply for student loans before the age of 18.


It is important that students remember that they, not their parents, are responsible for making sure the loan is repaid after they have completed their college degree. Parents like student loans because, if their child defaults on the loan, the parents are not held liable. Many students are able to get extended repayment terms with their student loans.

The most popular student loan is the Stafford Loan. There are two variations on the Stafford Loan. One variation is the Federal Family Education Loan Program. This particular type of loan program is funded by private lenders such as banks, credit unions, and loan associations.

The other type of student loan is the Federal Direct Student Loan Program. These loans are administered by IDE schools and are provided by the US government. With the Federal Direct Student Loan Program, students can choose to receive a subsidized loan or an unsubsidized loan. A subsidized loan is one in which the government pays the interest while you are in school. With an unsubsidized loan, the student is responsible for paying the interest, however you can have payments deferred until graduation. All students are eligible for an unsubsidized Stafford Loan.

There is a fixed interest rate of 6.8% for loans that were awarded after July 1, 2006. Before July 1, 2006 Stafford loans had a variable interest rate that was capped at 8.25%.

It is critical for students to remember that repayment of student loans begins six months after they graduate from a college or university. Although these loans are renowned for their low interest rates, students who fail to make payments quickly find out how fast the interest adds up.



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