Student Loan Definition & Types?

1. What is a student loan?

A student loan is a financial aid that’s given to students for them to be able to afford their studies. Student loans are generally granted through banks or some other private organizations and there may also be cases where the government aids the people by putting up public funds for education.

2. What are its types?

There are many types of student loans you can get, but the two most common forms of student loans are the Federal Stafford Loan and the Federal PLUS loan:

a. Federal Stafford Loan:

A Federal Stafford loan is a loan that is guaranteed by the government for students who want to study in college or even in some vocational courses. This is because as a student, you can’t afford to pay for your studies. The loan is given out in the form of subsidized and unsubsidized loans.

b. Federal PLUS Loan:

A Federal PLUS Loan is another form of government-issued student loan that is given to parents so they can pay for their child’s education. This type of loan is also given to graduate students who want to pursue their postgraduate studies. Plus, this loan is not subsidized so the interest rates applied to it are much higher than those for Stafford loans.

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3. Who qualifies for a student loan?

Anyone who wants to pursue higher education can benefit from a student loan. It’s ideal for those who want to study but don’t have the means to pay for their studies because they come from a poor family or no one in their family is earning enough money at the moment. However, you have to be very careful when choosing which type of loan to go for because, in the end, you will have a difficult time paying off your debts.

4. What are the benefits of having a student loan?

Having a student loan is generally seen as good because you are able to get an education. Because of that, having loans can help you land better jobs in the future where you’ll be earning more money than those who don’t have any degrees or certifications to show for their efforts. Also, if your family comes from a low-income bracket, you can borrow money from the government to go for your studies, and this way, you won’t have to worry about not having your parent’s support.

5. What are the disadvantages of having a student loan?

One of the major disadvantages of getting a student loan is that it’s very hard to pay off, especially if you’re not earning enough money. This is because the interests in student loans are high and they can accumulate very quickly. Also, you will have to make repayments even if you’re still studying so it’s quite common for students to delay their studies while they work on settling their debt.

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