Understanding Student Loan Programs

Published January 10, 2013 by

As any parent or prospective student can attest, college can be quite expensive. Student loan programs exist to help students who might otherwise go without a secondary education to be able to pay the costs associated with attending college.

These programs provide benefit to students, but they are still loans. This means that they do have interest rates and many are still based on the applicant’s credit rating. Many student loans do, however, offer different options than typical loans, such as the ability to postpone repayment until a set number of months after graduation, giving the student time to settle into a job. This gives students the freedom to concentrate on studies during school, rather than struggling to keep up with both the demands of education and the demands of keeping up with loan payments.

Student loan programs offer a mixture of both subsidized and unsubsidized loans to students who exhibit financial need. A subsidized loan is a loan in which the government pays interest while the student is in school. With an unsubsidized loan, interest accrues even while the student is in school and must be repaid after graduation.

Student loans that are credit based typically offer lower interest rates than other private loans, but borrowers can benefit greatly from using a cosigner when their credit is poor or they have little to no credit. A cosigner with good credit will greatly reduce the interest rate of the loan. Student loan programs are designed to benefit students and offer affordable payments, but creditworthiness is still a criterion for determining interest, as it signifies the likelihood of the loan being repaid.

Student loans vary from one type to the next, and it is important to read the terms of any loan that you consider. Each lender has different repayment terms, interest rate schedules, and policies. Be sure to look into policies regarding loss of employment and disability in regards to repayment obligations and to be certain that you understand fully all the terms of any loan you choose. Choosing the right student loan program can jump start your education and put you on the path to financial and real world success.