What are student loans and how are these helpful?

student loansStudent loans have been designed to help students and their parents achieve their dreams of higher education. The cost of education has increased so much so that it has become necessary to borrow in order to take on a new educational program.

This means that if you are either a parent or a student, you can obtain a student loan to complete higher education. Student loans are offered by the private lenders and also by the federal approved lenders.

Student short term loan details

Student loans are available from both the private, lenders and the federal lenders. Student loans are also available with the state approved lenders. It is easier to obtain the federal and state based student loans more easily than the ones available with the private lenders. The process which is followed with regards to obtaining student loans is same as that of the process followed in obtaining any other types of traditional loans.

In order to obtain a student loan, you will have to make sure that you have a clear understanding of the same. As the concept of borrowing remains the same, in this case too you will have to repay the amount borrowed which is known as the principal along with the interest payments. There is pre-payment penalty involved with the loan and there are various types of repayment terms available. As the loan is being obtained for the purpose of completing higher education, the students can have the option to start making the payments only after the completion of the education. It is considered that once a student completes a course, he/she is going to get a job and can then go on to make regular payments on the loan.

Difference between federal and private student loans

There are quite a few differences in between the private and the federal student loans and these are:

  1. The federal student loans will have more affordable interest rates and terms in comparison to the private ones.
  2. You can obtain a federal student loan more easily than the ones which are available through the private lenders.
  3. The private student loans can expire after a few years, but the federal student loans never expire.
  4. Loan forgiveness to some extent is available with regards to the federal student loans. On the other hand, the private student lenders have no such option as forgiveness on student loans.
  5. If you fail to repay the federal student loans, your wage and Social Security can be garnished. This can happen even without a court order. On the other hand, the private lenders will have to sue you, win the case and only then can they garnish your wage.
  6. In case of the federal student loans, the interest rates is set by the government and are based on the norms of the government. On the other hand, in case of the private student loans, the interest rate is solely set by the lender.

Therefore, you can see that how are student loans important and helpful for you to complete higher education.

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