Types of Education Loans
1. Federal Student Loans
- Subsidized Federal Loans: These loans are available to undergraduate students with demonstrated financial need. The government pays the interest while the borrower is in school at least half-time, during the grace period, and during deferment periods.
- Unsubsidized Federal Loans: These loans are available to undergraduate and graduate students, and there is no requirement to demonstrate financial need. Interest accrues on unsubsidized loans from the time of disbursement, and borrowers are responsible for paying the interest.
- PLUS Loans: These loans are available to graduate students and parents of dependent undergraduate students to help cover the cost of education expenses not covered by other financial aid. PLUS loans require a credit check and may have higher interest rates compared to other federal loans.
2. Private Student Loans
Private student loans are offered by banks, credit unions, and other financial institutions. Unlike federal loans, private loans are not subsidized by the government, and interest rates, terms, and eligibility criteria vary among lenders. Private loans may be used to cover educational expenses beyond what federal loans and other financial aid cover. They may require a credit check and a cosigner, particularly for students with limited credit history or income.
Education Loan: How it Works, Types & How to Apply
An education loan is a type of financial aid provided to students to help them cover the costs associated with pursuing higher education. These loans are typically offered by banks, financial institutions, and government agencies and can be used to pay for expenses such as tuition fees, books, supplies, accommodation, and other educational-related costs. Education loans enable students and their families to afford the expenses of attending colleges, universities, vocational schools, or other educational institutions. The loan amount, interest rates, and repayment terms vary depending on factors such as the lender, the borrower’s financial need, creditworthiness, and the type of loan (federal or private).
Key Takeaways:
- Education loans provide essential financial assistance to students to cover the costs associated with pursuing higher education, including tuition fees, books, supplies, and living expenses.
- Education loans come in various forms, including federal loans and private loans, each with its own terms, interest rates, and repayment options.
- While education loans provide immediate financial relief for educational expenses, they also represent a long-term financial commitment.
Table of Content
- How does an Education Loan work?
- Types of Education Loans
- Benefits of taking an Education Loan
- List of Education Loans by Top Banks in India
- How to Apply for Education Loan?
- Tax Benefits on Education Loan
- Conclusion
- Education Loan – FAQs