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Exploring Student Loans in the US to Pursue Higher Education

3 Min Read
July 19, 2023
EduALL

As high school students, you're likely facing an exciting time of self-discovery, growth, and planning for the future. While envisioning your dreams and aspirations, one crucial aspect that often comes to mind is higher education. However, it's no secret that pursuing a college or university education requires a significant financial investment. This is where the concept of student loans enters the picture. Let’s find out all you need to know about student loans.

Student Loans

A student loan is a sum of money provided by the government or a private company to help students pay for their education expenses, such as tuition. Unlike scholarships or grants, student loans need to be repaid with interest after graduation.

While there are other options such as scholarships, grants, and work-study programs to fund your education, many students opt for student loans as a way to cover college costs. It's important to use student loans responsibly. According to Student Loan Hero, around 69% of students in the US took out loans to finance their college education.

According to the same data, the average debt for college graduates in 2019 was $29,000. It's advisable to borrow as little as possible to minimize the long-term financial burden. Before taking on a significant loan, it's crucial to research starting salaries in your desired field to understand your ability to repay the loans after graduation. By making informed decisions about borrowing, you can better manage your finances and ensure a smoother financial transition after college.

Federal Student Loans

Federal student loans are financial resources provided by the U.S. Department of Education to help students and their families afford the costs of higher education. These loans are a popular option for many students due to their favorable terms and borrower protections.

To apply for federal student loans, students must complete the Free Application for Federal Student Aid (FAFSA). This application collects information about the student's financial situation, such as income and assets, to determine their eligibility for federal aid. Unlike private student loans, federal loans do not require a credit check or a cosigner, making them accessible to a wide range of students.

There are different types of federal student loans available, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Federal Perkins Loans. Direct Subsidized Loans are available to undergraduate students with demonstrated financial need, and the government pays for the interest on these loans while the student is in school and during certain deferment periods. Direct Unsubsidized Loans are available to both undergraduate and graduate students, and interest begins accruing as soon as the loan is disbursed.

Private Student Loans

Private student loans are financial resources offered by private lenders, such as banks, credit unions, and other financial institutions, to assist students in funding their education expenses. These loans are different from federal student loans, as they are provided directly by private entities rather than the government.

To obtain a private student loan, students typically need to complete an application process provided by the lender. This process may require personal and financial information, including income, employment details, and credit history. In some cases, a cosigner may be required, especially if the borrower has limited credit history or income.

Private student loans can be used to cover a wide range of education-related costs, including tuition fees, textbooks, housing, transportation, and other educational expenses. They are available for undergraduate, graduate, and professional students pursuing higher education at accredited institutions.

Remember, student loans can be a helpful tool if used responsibly. They can provide you with the financial means to pursue your passions, unlock new opportunities, and invest in your future. However, it's essential to approach student loans with careful consideration and understanding because there is an interest rate included with the student loans. Nevertheless, it is still one of the best options to fund your study abroad in the US.

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