Education Loans

Over the years, education has become a costly proposition for many. Statistics indicate that two-thirds of undergraduate students graduate with some financial debt. The average loan debt among graduating students is in the vicinity of $20,000. Education loans are one way of easing the financial burden, at least temporarily. Education loans will have to be repaid with interest and could be of different types. They can be obtained from government agencies or private banks and financial institutions.

The advantage of government loans is that the interest rates are often very low. But at the same time, these loans may often be available only to those who demonstrate a financial need. Education loans could be broadly classified into three categories — student loans, parent loans and private education loans. Loans categorized as student loans could be further divided into two — subsidized and unsubsidized.

The subsidized loans have to be paid when in school, but the government pays the interest. If availing an unsubsidized loan, you will have to pay the interest too, but the payments can be put on hold until after graduation. Education loans can also be obtained from campus-based loan programs where the school acts as the lender with funds provided by the government. Parent loans are the educational loans available to parents of dependent students to help their wards or supplement their financial aid.

 Private education loans are the ones made available by private lenders. Here, the eligibility is determined based on an individual’s credit score. Most people turn to these as a last resort or for additional funding in addition to federal education loans. This is because interest rates are much higher.  But there is not so much paperwork to be completed and parents can choose to repay the loan after the student has graduated. This option is not available in government sponsored parent loans.