An Introduction To Student Loans

Student Loans are often part of student financial aid packages, which assist with paying for their education. These loans are low interest rate loans. Either the government or other authorized banks or financial providers issue them. Loans are different from grants and scholarships, as they need to be paid back.

The loans are generally classified into three types: Federal Student Loans for students, Federal Student Loans for parents and Private Student Loans for students or parents. Each loan has different terms and conditions.

Federal student loans, also known as Stafford or direct student loans, are given to the students directly. They are sub-classified into subsidized or unsubsidized, according to the financial needs of the student. The government provides the loan either directly or through agencies. The repayment starts only after graduation. In subsidized loans, the student need not pay the interest, and in unsubsidized the interest amount is capitalized with the loan amount. The former one is provided purely based on financial need, while the latter is available for all the students.

Federal student loans for parents are for parents of students and the repayment starts soon after the procedures. There is no grace period, like the student loans come with.

There is yet another type of loan, private student loans, and they offer higher loan limits but with lower interest rates and a grace period with no payments due until after graduation. It is often provided on the basis of the credit history of the applicant and with a co-signer. This type of loan is often viewed as an alternative to federal student loans for parents.

Federal student loans are distributed through two main channels known as federal direct student loans and federal family education loans. The amount the student can borrow depends on the Federal policies.

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