A student loan is a loan that is granted to a college student enrolled
in courses full or part time for at least one semester or quarter and
who have declared a major with the intent of pursuing a degree of higher
education. Student loans can be granted through various lenders with a
governmental guarantee, or can be granted from private lenders with no
guarantee. Some student loans do not require a parent's signature, while
others do. The government guaranteed student loan is classified by two
types, subsidized and unsubsidized.
|The subsidized student loans
have a yearly limit and allow for the government to pay the interest
on the loan while the student is in school. The unsubsidized student
loan allows for a higher yearly limit, but the student must pay
the interest while in school, or the accrued interest will be added
onto the balance of the loan and is the responsibility of the student
during repayment. A student loan can be deferred while the student
is in school half time indefinitely. Private student loans usually
have a set period of deferment, 2-5 years, and then the student
must begin repayment regardless of whether or not they have completed
Currently, student loans have the best interest rates in town.
As the interest rate index rises, so will the student loan rate.
During low rate times, many scramble to consolidate their student
loans. This saves a tremendous amount of interest in the long
run, since a student loan repayment plan can extend over 25 years
depending on the loan balance. Those students with an extremely
low student loan balance ($5,000 or less) usually only have the
typical 5 or 10 year repayment option. A student loan is eligible
to be used for tuition, books, on campus housing and childcare
expenses. Some student loans allow for the purchase of an automobile
to get to and from school, or other pertinent school materials
such as a computer or to pay off other student loan debt.
Many students today are counting on student loans for their education.
What they are not realizing when they sign the student loan promissory
note is the debt they are incurring for a very long time after their
schooling has been completed. The average student loan balance is upwards
of $50,000 for a four year degree. Add to that professional education
costs, and some students will have over $150,000 in student loan debt.
While the investment of an education is always a wise idea because investing
in one's mind will never diminish in value, the costs associated with
this investment and the income expected to earn should be carefully
evaluated. Some careers do not warrant a high enough salary to repay
the loans. Grants and scholarships should always be considered as alternatives
to obtaining student loan debt.
About the Author
Dean Shainin is a consultant specializing in student loan consolidation.
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