Student loans are loans offered to a student that are used to pay off education-related expenses.
The yearly cost of college education, including tuition, fees, housing, meals, books, and supplies, in the U.S. is an estimated $22,826 if you are enrolled in a state-funded college and $44,750 if you go to a private university or college. Some private schools may even charge you more than $60,000 a year.
While the cost of higher education is affordable for some, most students need financial assistance to fund their dreams of a college degree. In fact, as per statistics available, of the 20 million Americans attending college each year, 60% or 12 million students need some kind of loan.
Sources of Loans
The most popular source of student loans is federal student aid from the U.S. Department of Education.
Here are the basic criteria regarding student loan eligibility for federal student aid:
- You have a proven financial need. (financial need = cost of attending college minus the expected contribution by your family)
- You must be a U.S. citizen, U.S. national, or have a Green Card.
- You must have a valid social security number.
- You must be studying in or accepted for an eligible degree or certificate program.
- You must have a satisfactory academic record.
The repayment period for a federal student loan can be 10, 20, or 25 years, depending on the repayment plan. (Visit https://studentaid.ed.gov for more information.)
Private banks and financial institutions also offer loans, but a private student loan has several disadvantages compared with a federal student loan.
You may ask yourself, “Is it really worth going to college if I need to obtain a loan?”
The answer is yes. First, a federal student loan has a low interest rate. Second, by going to college, you are securing your future. Obtaining a college degree substantially increases your future earning potential. As per the National Center for Education Statistics, among the age group 25 to 34, the average college graduate earns 114 times more than someone with only a high school diploma.
- Americans owe more in student loan debt than they do in credit card debt.
- Currently, more than 40 million Americans have student debt. The population with student loans is actually greater than the entire population of Canada, Poland, North Korea, Australia, and more than 200 other countries. It’s also about four times greater than the population of Sweden.
- One survey found that 27% of those with student loan debt moved back in with their parents after college.
- Student loan debt is currently at $1.2 trillion and climbing.