“What is an Education Loan” is responsible for what education loans are used for. Therefore, an education loan is a fund (money) one can apply for to handle finance. In fact, you can borrow for post-secondary education or higher education to handle expenses. For instance, your college tuition, books, living expenses, etc. In addition, you can also experience a deferred period that can come on your six months of the grace period or within the period of your stay in college.
WHAT YOU SHOULD KNOW
- Firstly, An education loan is a sum of money lent
- Secondly, It is designed for education financing only. Such as post-secondary education or higher education expenses.
- Education loans can cover your tuition fee, books, and living expenses throughout your stay in school.
- Education loans are of two types; federal loans and private loans.
- Because education loans come from different lenders (government and private entity), deferment varies. Thus, Deferment of payment could occur while students are in college, or after six months of the grace period.
How an Education Loan Works
A loan will be granted to you when you attend an accredited college or university. The loan can come through the federal government (federal loans) or private lenders. Meanwhile, federal loans may be stepped down even though they offer lower interest rates. But Private loans require more lending process. Besides, they have higher rates compared to federal loans.
Types of Education Loans
Generally, loans are grouped into two kinds. Thus, they can be federal loans or private loans. These are the major sources of loans where all other types of loans will be disbursed.
Federal Student Loans
Federal student loans are loans offered by the state. Many seek federal student loans when they require help for studies. Are you one of them? Then, you must complete a free application for federal student aid (FAFSA). Afterward, more things will be asked to complete the form. For instance, the applicant’s status such as how dependent he/she could be to the parent. Many times, a credit check is required in federal loans. Therefore, the money offered to a student is based on the cost of attendance of the school you attend or plan to. Because you have completed The FAFSA, FAFSA work to identify the money required for an eligible student.
Federal loans exist in different forms. Such as Direct Subsidized and Direct Unsubsidized Loans and Direct Consolidation loan. Whenever loans are applied and approved, the state makes sure that schools involved get the required cost of attendance.
Note: Subsidized loans will offer you funds and pay for the interest on their loans while the student is in school. Unsubsidized loans will allow deferment of payment but will not cover your interest.
Private Student Loans
Federal loans don’t always fill up the gap such as living expenses and will require you to borrow from private lenders. In addition, one can borrow to refinance a loan. Thus, private loans are loans offered by private individuals. Private student loans have more requirements compared to federal loans. Such as credit checks, etc.
Loan applications in private student loans can be made directly to the private lender. A private student loan is also influenced by the cost of attendance of the school involved. The funding will first get to the school to cover the bills, while the remaining goes to students (borrower).