A Basic Introduction to Student Loans

Student loans are supposed to help students who are financially unable to pay for their learning expenses. These loans will vary from one country to another in the way they are formulated. The most common types of student loans include college student loans, undergraduate loans, private student loans, and Federal Family Education loans. Important to note is that majority of student loans are issued by the government with lower rates of interest compared to normal loans.

The repayment of these loans is made only after one completes their education, allowing the students to give full concentration to their studies. However, upon successful completion and graduation, you’ll be given a grace period of at least six months to ‘welcome’ you to the outside world and give you time to seek employment and start earning. Federal student loans can sometimes be forgiven under particular circumstances, i.e. on an income reliant plan after 25 years. Important to note is that there is a pre-set period of time that students are expected to pay off the loan.

If you want to buy books, computers, pay tuition etc, you can seek private student loans, which are extended based on your credit history. Needless to mention, with a good credit record, you will get the loan with a low rate of interest as well as less fees. Perhaps the biggest advantage of student loans is that they have broader limits and you’ll start repayment only after graduation.

Second comes the Federal Student Loans, extended either directly to the students or the parents. When the loan is extended to learners, payment will start after completing the studies but if it is awarded to the parent, loan repayment has to start immediately. Since Federal loans aren’t determined by the applicant’s credit history, there would be no need for a co-signer.

Advantages of student loans over regular loans Perhaps the biggest advantage of student loans is that they are accompanied by lenient and very low rates of interest and fees. When students start the repayment process, there are various repayment options that will allow the student to select the most suitable payment option that will be in line with their financial situation. One can even seek to repay the loan for an extended period of time, sometimes up to 30 years, and what is more, if your financial status deteriorates, you can defer repayment for a period of 3 years. Some loans are also eligible for forgiveness.

Repayment Strategies used by students Once a student graduates, it may take 6 or more months to get a permanent well paying job. In such situations, students may be forced to do temporary, part-time, or freelancing jobs in order to foot their loan. To cut on costs, students learn to cost-share by sharing rooms with friends or living near their work places to reduce on transport costs. During financial crisis times, a student can apply for forbearance from the lender to put up with them for a few months. Students can even seek loan consolidation services, with the hope that it might give them some sort of financial relief.
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