What is a student loan and what possibilities does a loan-needing student have?
In the first place, a student loan is supposed to help students with the many costs today’s universities involve, such as fees, tuition, books and everyday life, as many students have to rent apartments in order to be able to follow university lessons.
Unlike other loans, student loans have lower interest rates, as banks reckon that it would be nearly impossible for an average students to pay high interest rates, considering that they can not work full time. A student loan’s repayment schedule is also different from others loans, as the student’s needs are taken into consideration.
Most countries have student loan programs to help students pay for their college and university fees. These student loan programs are guaranteed by the state, which is why students can benefit from impressively low rates while they are in school.
Student loans are usually included in larder financial aid packages which generally include scholarships, grants and study opportunities. In the United states, students can choose from two different types of loans: loans sponsored and guaranteed by the federal government and private loans, which obviously do not offer as low interest rates as the ones offered by federally-guaranteed student loans.
Sometimes, a student has no choice as all student loan options have specific requirements.
The amount of money they can borrow strongly depends on their income level, family’s income level and financial needs. The poorer they are, the more money they can borrow, as long as federal student loan programs are concerned.
With regards to repayment schedules, interest rates on student loans are usually two percentage points lower than the interest rates on conventional loans. We wish there was a fixed interest rate that applied to all student loans, but the truth is that interest rates greatly depend on the current market trends.
To repay a student loan, students may even defer installments until they are out of school, which is great as by doing so, students are able to focus on their studies without having to worry about finding the money to re-pay the loan.
Repayment usually begins after six or twelve months after they get out of school, so students have enough time to find a job that allows them to pay the installments. It makes no difference whether students graduate or not. From the moment they leave school, they will be no longer considered “students”, hence they will have to pay the monthly installments.
However, it is very important that students read through the loan conditions and ask for further information before making a decision. Most of the time, students are given the possibility to extend the loan term so the monthly payment will be lower, even though interest rates will increase.
Among the various student loan options, federally-guaranteed loans are sure to be the most convenient one. However, federal and private student loans are not the only student loan options students can choose from. There are the so-called grant systems, which are preferred by many to the other two student loan options because more transparent.
The entire student loan system has in fact been harshly criticized because of its “tricky” conditions.Common critics include: lack of clarity and transparency, heavy monthly payments, inability to charge off debt in case of bankruptcy and having to pay installments no matter what (should a student injure themselves after leaving school, they will have to re-pay the loan even if their injuries are so grave they can not work).
One thing is for sure, it is important students look through the various student loan options available with an expert who can advise them as to what option is best for them.