Student Loan is a loan offered to students to pay for education-related costs such as tuition, residence or textbooks. Usually, these loans have lower interest rates than other loans. In general, students are not required to repay this loan until the end of their school or college period. Loan repayments usually start in pay or are paid off once they complete their education.
If you have been looking for scholarships everywhere but did not get results or scholarships given less for living expenses, then one solution is a student loan.
Student Loans Cover
The U.S. Dept of Education provides a student loan covering some financing. Here are some typical expenses that student loans can help you cover.
Tuition and Fees
Tuition is usually the biggest cost when entering college. In the United States, college tuition can reach an average of USD 31,231 per year (for private colleges). Student loans are specifically intended to help cover these costs, as well as other costs directly related to college existence, such as the cost of activities (including a campus gym or recreational facility), library fees, parking permits, and other expenses covering the use of technology on campus.
The cost of housing will be the largest expense, either living in dorm rooms or off campus. The average cost of student housing ranges from USD 7,500 to USD 9,000 per year, depending on whether you are studying at a private or public university. Student loans can be used to help pay for off-campus housing. However, you should plan in advance to ensure your costs are covered and you receive the funds on time.
Textbooks and Other Supplies
If you have a full schedule and need to buy some textbooks, it will increase your costs. According to the College Board, the average cost of books and supplies for full-time students in four-year state colleges can reach USD 1,200. Student loans can help cover the cost of books, as well as other school supplies.
The prices of laptop computers vary greatly depending on the brand and features available. Also, it depends on the type of computing power you need to help complete your college assignments. Tablet computers can be a cheaper option. Regardless of the type of computer you choose, student loans can be used to cover costs.
Types of Student Loans
Student Loan has a variety of types, depending on the needs of students. It is important to know how much interest is charged for each of these types. The payment of a feasibility plan also depends on the type of loan you want. There are two types of student loans that can be used by students, namely Federal Student Loan and Private Student Loan.
Federal Student Loan
Federal student loans allow students and their parents to borrow money to pay for a college or career school education. A federal student loan is made through a loan program administered by the federal government.
The U.S. Department of Education provides four types of student loans, including:
- Direct Subsidized Loans
This is usually provided for students, no interest is charged while you are educated or at least not charged up to half of your education time.
- Direct Unsubsidized Loans
These loans are typically for undergraduate and postgraduate education, interest imposed on the entire educational period.
- Direct PLUS Loans
This is a loan intended for parents of students, interest is charged during the entire period of education and the parent is the primary borrower.
- Federal Perkins Loan
This student loan is for graduates and professional degrees, and interest is charged during the entire period.
Private Student Loans
Private student loans are non-lending loans made by private lenders, such as banks or credit unions. The terms and conditions of private student loans are stipulated by the lender, not the federal government. If you are not a federal loan, check with the financial aid office at your school.
This loan is done by students to private companies and is usually given a fine when it is late to return it. This private loan is mainly used to help students cover school fees and off-premises loans.
If you need a loan to help cover college or carrier school education costs, think about federal student assistance first. All student loans offer fewer terms and payment options than private student loans.
Why federal student loans are a better option to pay for college education or career education? Federal student loans offer many benefits that are not usually owned by private loans.
These include low fixed interest rates, income-based payment plans, and loan cancellations for certain types of jobs, and postponement options, including delayed loan payments when a student returns to school.
Also, private loans usually require credit checks, while most federal loans do not need them. To that end, students and parents should focus on federal student loan options before considering personal loans.
5 Steps Guide to Applying for Student Loan
In general, there are five steps to get a Student Loan in the United States:
- Compile all the financial information you will need to apply for a student loan
- Use the FAFSA and CSS Profile forms to apply for student loans and free aid
- FAFSA and CSS Profile online
- Review your Student Aid Report
- Wait for your financial aid award letter
Applying for federal student loans
Federal loans are likely your best student loan option. They offer more generous borrower protections than private student loans do, such as the ability to switch to an income-driven plan if you can’t afford your monthly payments or to defer payments if you lose your job. NerdWallet recommends turning to private loans only after you’ve borrowed as much as you can in federal loans.
The Free Application for Federal Student Aid, or FAFSA, is the application for all federal student loans. Filling it out is also your ticket to need-based aid — including federal grants, work-study and some scholarships — if you qualify. To learn more about the various types of federal aid, check NerdWallet’s guide to FAFSA Financial Aid Options.
The steps to apply for federal student loans
- Complete the FAFSA or Renewal FAFSA (for returning students) at FAFSA.ed.gov.
- Receive a financial aid award letter by mail or email from your school financial aid office.
- Contact your school’s financial aid office to accept the financial aid and student loans.
Applying for private student loans
Unlike most federal student loans, private student loans require a full underwriting process. Lenders look for borrowers who have good credit and enough extra cash to make loan payments given other expenses — that is, a relatively low debt-to-income ratio. If you don’t meet those requirements, you may need a co-signer to qualify for a private student loan.
Banks, credit unions and a new crop of online lenders all offer private student loans. The biggest private student lenders are Citizens Bank, Discover, Navient, PNC Bank, Sallie Mae, and Wells Fargo, according to a 2015 report by Measure One.
Startups including SoFi, CommonBond and College Ave also offer private student loans. With so many options, it’s important to compare interest rates, fees, and borrower protections before you choose a lender. You can compare private student loan options on NerdWallet’s private student loan page.
If you already have student loans and want to know how to best pay down your debt, check out our guide to federal student loan repayment plans or our guide to tackling private student loans.
The steps to apply for private student loans:
1. Pulling together information, including social security number, telephone number, address, income level, and value of any assets.
2. Completing the Form (have everything ready when you sit down to apply, keep your co-signer handy, remember to pay close attention to the total cost of the loan, run the numbers before you apply).
Federal student loans for college or career school are an investment in your future. You must repay your loan, so be sure you understand your options and responsibilities. If you apply for financial aid, you may be offered loans as part of your school financial aid offer. A loan is a money you borrow and must pay back with interest.
If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government or from private sources such as a bank or financial institution.
Loans made by the federal government, called federal student loans, usually offer borrowers lower interest rates and have more flexible repayment options than loans from banks or other private sources. Learn more about the difference between federal and private student loans.