A student loan
If you don’t have the money to pay for college, a student loan will enable you to borrow money and pay it back at a later date, with interest. A loan is different from a grant or a scholarship. If you receive a grant or a scholarship you’re not borrowing that money. That is money that has been given to you as a gift and doesn’t need to be repaid.
Types of student loans available
There are two main types of lenders which offer student loans. The U.S. government offers federal student loans. Banks, credit unions, state loan agencies and other financial institutions offer private student loans. Be careful, as some of the lenders that offer private student loans also service federal student loans on behalf of the U.S. government, so it is easy to get confused.
Federal loans
Federal student loans are loans that are made by the U.S. government. It’s a good idea to take out federal loans first because these loans usually come with more benefits than loans from private lenders.
The advantages of federal loans over private loans include:
There are four types of federal loans:
Private loans
Private student loans are loans that come from a private lender, usually a bank, a credit union, a state loan agency or a non-bank financial institution. They can come with a fixed or variable interest rate and often require the student borrower to have a cosigner. Interest isn’t subsidized, so as soon as you borrow money the loan will begin accruing interest.
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