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Student Loans

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Student loans are loans offered to students and/or parents to pay for college educational expenses.

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There are a variety financial aid types available to students attending colleges or universities[1], including:

  • Grants

Grants are really gifts that do not need to be repaid. Grants typically are based on financial need. An example is a Pell Grant.

  • Scholarships

Scholarships are offered by various organizations (e.g. schools, minority organizations, trusts, etc.). The money received from a scholarship does not need to be repaid. Most scholarships have very specific criteria indicating who can apply for and get the scholarship.

  • Work Study

The Federal Work-Study Program (FWS)[2] is federally funded financial assistance where students earn money by working and attending school. Work-study money does not need to be repaid.

  • Loans

Money that is borrowed with interest are loans. Loans must be repaid.


There are two types of student loans: private and federal.

  • Private

Private student loans are borrowed from various financial institutions. Private student loans are used to either supplement or replace federal student loans. These loans may have significant fees attached or a higher interest rate compared to a federal loan. Some of these loans can also require an immediate pay off while still in school. Private student loans tend to be used after federal loan funds are completely maxed out.

  • Federal

Federal student loans are received from the Education Department. There are various types of loans that are offered. Some of the loans are based on financial need and the interest payment deferred until after the student is out of school. Other loans accrue interest as soon as the loan is paid out to the student. An example of federal student loans are those available through the Direct Loan Program.  Students and/or parents can begin the student loan process by completing a FAFSA application.

In general, educational loans tend to have lower interest rates compared to other consumer loans (e.g. car, mortgage, etc.).


  1. http://public.findlaw.com/bookshelf-consumer-action-handbook/caw_education_financing.html
  2. http://www2.ed.gov/programs/fws/index.html

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