What Are Student Loans:
A student loan is a sum of money borrowed from the government or a private lender in order to pay for higher education. The loan has to be paid back later, along with the interest that builds up over time.
How Do Student Loans Work:
You can apply for federal student loans by filling out the Free Application for Federal Student Aid (FAFSA). You and your parents then share your financial information on the form, which is sent to your schools of choice. The financial aid office at each school crunches some numbers to figure out how much (if any) aid the student qualifies for, and then sends them an “award letter” with all the details about their financial aid offer.
Different Types of Student Loans:
Federal Student Loan
Direct Unsubsidized Loan
Direct Plus Loan
Private Student Loan
How Much Money Can You Borrow:
Some student loans allow you to borrow up to the full cost of college, reduced by the amount of other financial aid received. Student loans can be good debt since they are an investment in your future. However, too much of anything can hurt you. So, borrow as little as you need, not as much as you can.
Also, many student loans do not require repayment until after you graduate college. If you choose to study for longer, like go to graduate school, your undergraduate loans can be deferred and let you wait until you graduate from graduate school to pay back the loan. Student loans also generally have a grace period, a short amount of time after you graduate college to let you look for a job to repay the loan.
Pros of Student Loans:
Student loans help you afford college.
Student loans can be used for things besides tuition, room, and board.
Student loans can mean the difference between an okay school and your dream school.
Paying off student loans can help you build credit.
Cons of Student Loans:
Student loans can be expensive to pay off.
Paying off student loans can mean putting off other life goals.
Defaulting on your student loans can tank your credit score.
It's almost impossible to get rid of student loans if you can't pay.
Student loans mean you start post-college life with debt.
Written by Anna Li