What are Student Loans

Student Loans are loans taken out by college students in order to help pay for tuition, books and other school expenses (including living expenses) that are offered by the Federal Government as well as by private lenders. What makes student loans unique are the repayment terms that come with them: student loans do not have to be repaid normally until 6 months after dropping out of school or dropping below part-time.

The Risks of Student Loans

Student loans are a valuable resource that help millions of students attend school that would not otherwise be able to afford to go, but they do have their downsides including:

• General lack of awareness of total loan amount
  
  Very few students keep tabs on how much they are actually borrowing through the years they are in school - especially if their education is subsidized in other ways such as by grants or scholarships. This often can lead to a nasty surprise after graduation when the first demand for payment is due.

• Instant-gratification mentality
  
  Without the need to repay the loan until after graduation, many students also do not concern themselves with borrowing only the minimum that they need to help pay for their school expenses and instead may simply accept all that is offered to them over time which can easily lead to a high debt that may not have been entirely necessary.

• Ease in acquiring the loan
  
  Of all of the loans available, student loans can be the easiest to get. For the Federal (Perkins or Stafford) student loans, unlike regular loans where having a high income is a plus, having a low income is a plus as they are designed to help low-income families and students get an education. This means that unless the dream of graduating college and getting a well-paying job comes true, most people who qualify for the Federal loans will lack the ability to pay for them after graduation.

• Stealthy interest rate
  
  Student loans come in two types: subsidized - where the interest is paid for the student for as long as they are in school, and unsubsidized, where the interest on the loan begins accruing as soon as the loan is taken out. These unsubsidized loans can have a way of sneaking up on a person and slamming them with much higher debt than expected after graduation.

If there are questions that are unanswered, see if they have been answered in our frequently asked questions.