There are two main types of student loans: federal loans and private loans. Federal loans are funded by the government, while private loans are offered by banks, credit unions, and other financial institutions.
Eligibility for student loans depends on factors such as your citizenship, enrollment in an eligible educational institution, and satisfactory academic progress. Requirements may vary between federal and private loans.
Student loans have interest rates that determine the cost of borrowing. Federal loans usually have fixed interest rates, while private loan interest rates can be fixed or variable. Lower interest rates are generally preferable.
Repayment terms define how long you have to repay your loan. Federal loans typically offer more flexible repayment options, including income-driven repayment plans that base monthly payments on your income level.
A grace period is a period of time after graduation, leaving school, or dropping below half-time enrollment when you're not required to make loan payments. Grace periods vary by loan type, and interest may or may not accrue during this period.
Student loans have borrowing limits, which may depend on factors such as your year in school, dependency status, and whether you're considered a dependent or independent student.
The Free Application for Federal Student Aid (FAFSA) is a form used to determine your eligibility for federal financial aid, including grants, scholarships, and loans. It's typically required to access federal student loans.
Some federal loan programs offer loan forgiveness or discharge options for borrowers who meet certain criteria. For example, Public Service Loan Forgiveness (PSLF) is available to borrowers working in qualifying public service jobs.
Failing to make loan payments can result in default. Defaulting on a loan has serious consequences, such as damage to your credit score, wage garnishment, and loss of eligibility for future financial aid.
Loan servicers are companies that manage the billing and collection of loan payments on behalf of lenders. It's important to keep track of your loan servicer and maintain communication with them regarding your loan repayment.