Student loan

Specifically designed for student to pay for their university tuitions, as well as other necessities like books and living expenses. Student loans are becoming an important part of the credit system. These loans are different from other loans because the interest rates in student loans are usually significantly lower than in commercial loans. The user of the loan is obliged to repay the loan starting from the moment he or she finishes education.

There are very strict laws and regulations in countries which recognize student laws which stipulate the terms of bankruptcy and loan renegotiating.

There are two basic types of student (or educational) loans in the U.S. The first category are the federal loans which are financed by the federal government. These student loans represent a great, if not an overwhelming majority of student loans in total. The second category are private student loans. Two main types of federal loans are the subsidized and the unsubsidized loans. Subsidized loans are specific because the interest does not start to build up while the user of the loan is still in school.

Federal loans are always less costly compared to private student loans. Yet, the government is generating profit in student lending programs, measured in billions of dollars each year. This is because the borrowing costs are still lower than the interest payments.

There are very few cases in which the lender in a student loan can generate a loss. Because there are only a few legal possibilities when a loan liked this can be discharged, due to bankruptcy, for example. On of the proposed solutions for problems with student loans are the income based repayment plans. Based on this, the borrower of money (student) return the money depending on his income, not on the amount he owes and has to return. This is not, however, possible with private loans, only federal ones.

IBR plans generally position the amount the borrower has to return at around 10% of his monthly income. This allows for easier repayment conditions. Additional conditions may exist which stipulate the details of the loan repayment – employment in public or private sector, working for profit or non-profit, forgiveness of balance and so forth.

Most student can qualify for federal loans. One of the main features of federal loans is that all student are placed in the same starting position. They can borrow the same amount of money, the interest rates will be the same regardless of the money they or their parents make, credit history and so on. Several categories of students are excluded: earlier defaultees, students convicted of drug offenses and similar.

The Loan Amount

The amount a student can loan varies depending on the status of the student (whether he or she is dependant or independent) and their education level (graduate or undergraduate).

Repayment can start after the student leaves school, usually six to twelve months after the student gets the educational degree. Repayment conditions are also variable and, in most cases, allow greater flexibility than commercial loans.