Student loans fall into the much broader category "financial support"; however, they differ from scholarships and grants. Scholarships and grants are a form of "free money" that does not have to be refunded, while student loans have to be paid back. Student loans can be found in several different types, but usually fall into two main categories: federal student loans and private student loans.
Federal student loans are provided by the government and can be paid directly to the school, the student or the parents. Federal loans can be subsidized by the government, or unsubsidized depending on the student's financial needs. These loans usually follow strict terms and can only be used to pay expenses for education at the school that has approved your attendance. Education costs may include: tuition, rooms and board, books, school fees, transportation, equipment (eg a personal computer) and childcare costs.
Both subsidized and unsubsidized loans are guaranteed by the government, and almost all students are entitled to receive any form of federal funding, regardless of their financial status or creditworthiness.
When federal loans are made directly to the students, they come with a grace period of six months, which means that the student does not pay any money, and does not pay until six months after graduation. If the student is not examining, he or she has six months to repay the loan after he or she became a less than half-time student or released. In the event of a student rewriting at least half-time status, the loan will be postponed, but if they fall below half-time status again, there is no more grace period. Federal student loans to parents typically come with much higher loan restrictions, and payments can begin immediately, which can provide quick financial assistance.
Private loans are not guaranteed by any governmental authority, can be made to students or parents and issued by banks or other financial institutions. These loans come with higher loan limits than federal loans; However, interest begins to arise immediately. Private loans can be used for all types of education expenses, and can also be used as an addition to federal loan programs. Private student loans also come with a grace period of between six and twelve months after graduation. Although these loans can be quite good, they also come with high interest rates and multiple fees.
Private loans can be issued directly to the school in a type called "school loan". These loans require the school to agree on the loan amount and then get funds directly.
Private student loans usually have a variable rate, as opposed to federal student loans, which are usually fixed rates. It should be noted that certain types of private loans require significant premium fees. These fees are known as originating fees and are a one-off fee calculated with the amount of the loan. Origin fees can be taken out of the loan or added to the loan principal, often after the borrower's own discretion. Each percentage of an originating fee is paid once, while each interest rate point is calculated and paid for the life of the loan. These fees can significantly increase the overall cost of the borrower, while lowering the amount of actual money available for educational purposes. Some lenders offer low interest rates, non-credit loans, which can give significant savings.
Since fees and interest rates can vary widely from lenders to lenders as well as between loan types, a much more efficient way of comparing student loan terms is to look at the total funding cost. This will break down all the information into a clear number that will illustrate exactly how much the loan will cost you until it has been fully paid off. You will know how the terms will vary, how the fees affect the bottom line, along with how long it will take you to pay and how much you will end paying in total.