Student loan is the loan that are proposed by federal government, banks and financial institutions to young people to help them pay for their education. The main feature of this type of loans is deferred repayments and interests (repayment is not required until the student completes or abandons their education). This type of loans is very popular in countries where higher education is paid and expensive.
Student loans usually charge lower costs than other types of loans (such as personal loan). Interest rates are often fixed, so the student (the borrower) doesn't have to worry about severe changes of the interest rate, and interest might even be subsidized (or paid by the government).
Some features of the student loan:
- The amount of the student loan:
In some countries, the amount of student loan:
- can be spend only for the education,
- will be transferred to the education institution by one-time transfer for the full term of education or by annual transfers after receiving document about successful finishing of the already paid year.
In other countries, the amount of student loan:
- can be spend for the education and for the associated fees, such as student life expenses - living expenses (accommodation), books, student's equipment, etc.
- will be transferred to the existing checking account (current account) or special account opened for the student.
- The schema of repayment:
There are different schemas of repayment of student loans in different countries. As mentioned above, start of repayment is deferred until the education is completed or abandoned.
In some countries, this period of deferred repayment include full term of the education process and few years after it (1-2 years for finding the job, for example).
Note: Some banks or financial institutions that maintain student loans require providing documents about successful education process annually or even every semester.
- The term of the student loan:
There are different schemas of repayment of that type of loans and there are a lot of different rules and even strict laws regulating renegotiating and bankruptcy. So, the term of the student loan can be different, from several years after finishing the education up to 30 years.