Student loans are loans granted by the government or private lenders that can be used to pay for tuition, room and board, and books. It is worth mentioning that you don’t need to borrow money via student loans, and the more you borrow, the harder it is to repay. Apply for grants and scholarships to reduce the amount you/your family need to borrow. For Dollar Scholars tips on finding merit scholarships, click here!
Features of Student Loans
Student loans are different than other types of loans that students may qualify for because they are less expensive and are lenient on credit score. Student loans will often use specific terminology, so it’s important to check if your loan includes these terms:
In-School Deferment: Payments don’t need to be made until after you graduate.
Unemployment Deferment: Payments don’t need to be made until you find a job.
Limited Income: Federal student loans can adjust your monthly payments when money is tight
Potential Tax Benefits: In some cases, interest paid on student loans can reduce your taxes.
Loan Forgiveness: In rare cases, borrower’s loans may be forgiven after years in a public service job.
Federal vs. Private Loans
Loans offered through government programs (federal loans) are usually more borrower-friendly, easier to qualify for, and affordable. Private loans are usually offered via banks and credit unions. These loans are harder to qualify for, and as a result, you can have a parent/guardian co-sign the loan (both of you are responsible for repaying). As opposed to federal loans, private loans can have variable rates, which can be risky if interest rates rise significantly. For more information on interest rates, click here.
How to Apply for Loans
Make sure to talk to your college’s/potential college’s financial aid department to see what type of aid they offer - grants, scholarships, or loans. Next, fill out the FAFSA by the school’s deadline. For more information about the FAFSA and how to fill it out, click here.
For private loans, shop around and apply to the private lenders separately.
For more information, calculators, and quizzes visit Student Loan Hero!