The dreaded Student Loan. If your planning on attending college, and your parents aren’t rich, then you will most likely be signing up for a Student Loan. Student loans were created to help students pay for university tuition, books, and living expenses. A student loan is different than a mortgage or other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education.
There are two types of student loans for you to choose from: The first type of loan you can get is a federal loan that is sponsored by the federal government and the other is a private student loan. Federal loans can be “subsidized” or “unsubsidized”. Interest does not accrue on subsidized loans while the students are in school. Federal Student loans are usually less expensive than private student loans, but the federal student lending program still generates billions of dollars in profit for the government each year, because the interest payments are always greater than the government’s own borrowing costs, loan losses, and administrative costs.
Private student loan lenders are often criticized and label as being loan sharks because of their predatory lending practices. The biggest lenders, Sallie Mae and Nelnet, are frequently criticized by borrowers. Often times many students are stuck paying back these loans for the majority of their adult life, making college a hard choice to make because of all the debt that comes with it. But there’s hope! You don’t have to be weighed down with student loan debt.
Signed, Isidori Mtabo