Student loans are financial aid that students borrow to help pay for college. They’re available from the federal government, private lenders, and state governments. Federal loans are the most common student loans, but other options can help you pay for school.

Federal student loans

The federal government offers two types of student loans: direct subsidized and unsubsidized. The type of loan you get depends on your level of need and whether or not you qualify for a credit-based subsidy.

Direct subsidized loans are awarded based on financial need. That means if you demonstrate financial need and qualify for a direct subsidized loan, you won’t have to pay interest while in school at least half-time, up to six months after leaving school. 

You’ll also be required to make payments while enrolled in school at least half-time, but interest won’t accrue during those periods when payments aren’t required. You can borrow up to $23,000 in Direct Subsidized Loans for up to eight and ten years if you’re a parent borrower. Graduate students must maintain satisfactory academic progress to receive an additional year of eligibility with this type of loan.

How Do College Student Loans Work?

College students can borrow money from the federal government and private lenders to pay for their education at a college or university, generally during the summer before they start school or during their freshman year of college. These funds are disbursed through the school, which may collect fees from the borrower for handling administrative tasks related to disbursement, such as verifying enrollment status or providing academic counseling.

Borrowers must first fill out an application called a Free Application for Federal Student Aid (FAFSA). The FAFSA determines how much money a borrower can receive each year based on several factors. These include family income level, state of residence, number of children in college at once, and other factors determined by the government.

What are the Benefits of Student Loans?

Easy application

Applying for student loans is pretty straightforward because there is no need to complete much paperwork. You can apply for a loan without meeting your lender in person. You only need your Social Security Number, income, and other personal information, as well as the contact information of your bank or credit union. Besides, a student loan calculator will go a long way.

 Low-interest rates

Student loans have low-interest rates that are much lower than those charged by private lenders like banks or other financial institutions. In most cases, the interest rate is fixed and does not change over time unless there are changes in the economy or other factors affecting the economy, such as inflation, etc.

This means that your monthly payment will remain constant throughout repayment, even if you cannot afford it due to increased living costs or other expenses incurred during the repayment period. This makes it easy for you to budget your finances accordingly and plan for future expenses such as buying a home, paying off debt, etc.

High flexibility

Student loans are flexible because they can be used for any purpose and in any way you want. If you want to go abroad for higher education, you can use your student loan to pay for your flight tickets or other travel expenses. These loans can also be used to purchase books and other study materials required by the university/college of your choice.

Deferred payments until after graduation 

You don’t have to worry about paying back any part of your loan until after graduation. This gives you time to get on your feet financially before having to start paying back your student loans. And even then, there are options for repayment plans that give you lower monthly payments than are typically required by most lenders.

Financial aid eligibility

Some students may be eligible for financial aid when accepted into college or university programs. But if they cannot meet all of their expenses with grants and scholarships alone, student loans can give them the extra help they need to complete their education without having to drop out because of a lack of funding.

Finally, note that each type of loan has its own eligibility requirements, repayment terms, and interest rates. You can compare federal student loans side-by-side on this page to see which is best for you. If you need help finding the right loan for your needs, consider working with a college financial aid professional.