Student loans are an ever-present aspect of the modern school system. College entry fees are no joke, and most students don’t have the funds necessary to cover them.
In another time and place, a lack of funds would mean someone just didn’t get to go to college. But thanks to the modernity of the student loan, this issue can be absolved. Loans allow students who would otherwise be out of luck, the opportunity to attend college.
What is it about student loans that have made them such an integral part of the college experience? Let MaxCash walk you through student loans to show you why and how they’ve come to define the college experience.
What is a Student Loan?
Always best to start with the basics when covering any topic. Student loans are a subset of loans intended to help students obtain the funds they need to pay for entry to attend college. In many ways, they’re rather similar to other types of loans.
Student loans cover large expenses with a big up-front payment, with a series of smaller repayments promised later. However, they generally have a few specific traits that set them apart from the other varieties of loans.
Like most types of loans, student loans have specifications as to how they’re allowed to be used. In the case of student loans, it’s that funds can only be used on things related to the college education of the intended student. This can include expenses such as college tuition, books, and supplies, but also less obvious ones like living arrangements and groceries.
Next up is exactly how repayment works. Unlike most other types of loans, repayment of student loans doesn’t begin immediately. Instead, students don’t begin repaying them until they are through with the college process. This means that there’s generally a four-year window during which the student doesn’t have to make any loan payments.
The Best Benefits of Student Loans
Now that we’ve defined exactly what student loans are, it’s time to cover some of their many benefits. Some benefits are related to the information previously covered, but others are all-new.
This information is helpful for those interested in attending higher education and will likely result in a new appreciation for just how much student loans can offer.
- Lower Interest Rates – Generally, student loans have lower interest rates than most other types of loans available. Depending on the type of loan and lender, you might end up with either a fixed-rate loan or a variable rate one. Variable rates may seem to offer lower rates than their competitors, but can vary wildly. It’s generally better to stick with a safe fixed rate than a volatile variable rate.
- Accepts All Credit – Student loans don’t need the usual credit check that most other loans require. This means that, unlike other types of loans, which end up having limited availability by comparison, student loans can end up being used by just about anyone!
- Less Prerequisites – If you have sub-par credit and try to obtain any other kind of loan, you’ll generally just end up getting your inquiry rejected. One way to counteract rejection is to get a co-signer, however this prerequisite won’t be needed for student loans. You could apply for a student loan without a co-signer or existing credit.
- Increased Savings Time – Student loan repayment won’t start until at least the end of the schooling period for graduated students. However, you can push this starting point back even further by up to three years if you’d like. This allows students extra time to snowball funds before they start repaying the debt in full.
- Avoiding Extraneous Interest – Many other types of loans result in interest that starts to stack up right from the beginning, but student loans avoid this. Instead, during the time you aren’t paying the loan, either during the school tenure or during a delayed payment start, the government will pay off any interest that accrues.
- Easier Forgiveness – Most types of loans will start to damage your credit as soon as you miss a payment. Missed payments might also result in lawsuits or other methods of payment recovery. However, student loans have a longer forgiveness period, giving you a three-month window before a missed payment is reported. It’s then another six months before you fall into default and recollection starts.
And these are just some of the numerous benefits that can come as a result of proper utilization of student loans. Interested in knowing more? Want to learn how to get the most bang for your buck out of your student loan? Or maybe you’re interested in learning about the process of getting one? For the answers to all these questions and more, check out MaxCash’s section on student loans.