What is a student loan?
A student loan is loan that is offered to students to cover education related expense such as tuition, room and textbooks. Most student loans are offered to student at lower interest rates when compared to other types of loans. The students are not required to pay back these loans until the end of a grace period. This grace period usually ends when they complete their education.
Types of student loans
There are two types of student loans. These are:
1. Federal student loans: These are student loans offered by the government. There are two types of federal loans i.e. Stafford and Perkins. The federal loans come with favorable repayment options and low interest rates. The Stafford loans are commonly offered to students than Perkins loans. However, the Perkins loans are more favorable than the Stafford loans. This is because of the fact that they are all subsidized and the interest rate is fixed at 5 percent. Federal PLUS loans are given to parents who want to help their children pay for education.
2. Private student loans: These are education loans that are provided by banks and other financial institutions. The interest rates and repayment options are less favorable than those of federal student loans. Interest rate varies from lender to lender. Private student loans are not guaranteed or sponsored by the government and you are not required to complete a federal form to qualify.
Requirements to qualify for student loans
The general eligibility requirement for student loans include;
1. You have to demonstrate that you have financial need.
2. You have to be US citizen or an eligible non-citizen.
3. A valid social security number. There are a few exceptions.
4. You have to be enrolled as a student in an eligible degree or certificate program.
5. You have to maintain a satisfactory academic progress in a school or college.