School Loan: Enabling Education for All

By: EconomyWatch Content   Date: 4 December 2009

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A school loan, whether federal or private, enables a student to pursue higher education. It also makes it possible for students to meet related expenses. Numerous types of school loans are available in the US for students who intend to pursue graduate, undergraduate and professional courses. School loans are also available for parents who wish to fund the school education of their children. These loans can be federal, private or from local credit unions.

Types of School Loans

The US government conducts various school loan programs to enable education for all. The federal loans are highly popular and generally the first choice amongst the students. This is because of their attractive repayment terms and low interest rates. These loans can be issued under the government’s Direct Loan Program or the Federal Family Education Loan Program (FFELP). The Stafford student loans and the Perkins student loans are disbursed through the various schools and sanctioned on the basis of the information submitted by a student in the Free Application for Federal Student Aid (FAFSA). A student’s fund requirements and the preferred course are key factors that determine the exact amount of school loan to be sanctioned.

A student can apply for a school loan for any stream of study chosen by him. The various types of federal loans and private education loans are available for studying in a business school, law school, medical school or even a dental college. A student can fund the entire cost of his education by combining the federal and the private school loans. 

Federal and Private School Loans

Federal loans can be subsidized or unsubsidized depending on the applicant’s financial background. The interest on the subsidized loans is paid by the government during the:

  • Period of study in school.

  • Six months after leaving the school.

  • Duration for which the loan is deferred.

In the case of the unsubsidized loans, a student has to pay the interest himself but can get the same deferred until after graduation. In such a case, the interest is accumulated and capitalized. The federal loans are repayable six months after a student finishes school or drops to below half time. Private school loans are a bit expensive and granted after a credit check has been done. These loans should be resorted to only after exhausting the federal loan limit.


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