Education Loans - an Insight

by : Namrita Chhibber

Loans taken for funding or financing further education are called education loans. Education loans can be used to or costlier education courses. Also, these loans facilitate its borrower to utilize them for further studies as well as allowing him/her to pay back with easy and flexible repayment options.

Designed to support your educational needs and financial requirements, educational loans are further of many types.

Education loan types depending upon the lender are-

  • Federal loans: Federal loans are the most flexible and suitable as well as acceptable loan with numerous advantages such as low interest rate and low monthly repayment.

  • Credit loans: If a student or family has good credit record and decent credit history then they can utilize their credit to obtain loan with lower interest rate and loan fee.

  • Private loans: Private loans are the loans taken from private lenders. These loans can be taken to support other loans and has their own .

Education loans types also depends on the various kinds of beneficiary i.e. education loans can be taken by students, parents or undergraduates and more. In education loan system both the student and parent loans can take loan.

Parent loan is the kind of loan taken by parents to support the educational requirements of their children. There are times when a student can not apply for a loan due to some conditions such as age factor at that time parent can take loan on behalf of their children for funding their educational needs. In a parent loan, parents are responsible for the repayment of the loan.

Student loan is a financial help which allows students to continue their further education. It is a loan program designed as per a student's convenience and helps them to meet the higher and costly education. A student loan does not just allow a student with easy repayment and lower interest programs but also provides with the advantage of planning a future with relaxed mind. Before taking such loans a student need to understand the responsibility and seriousness behind them. Thus just like any other loan, student loan has to be taken only as a last alternative.

Loan consolidation:

A student consolidation loan is a flexible loan program that combines various loans into one single loan for financing your education. Consolidation loans are more or less like a bundle of advantages which aim at providing a student with financial relief and allow him or her with the privilege of further education. The very first and foremost advantage of a loan consolidation is the flexible interest rate. Consolidation loan allows a student in earning or grabbing the feasible lowest interest rate. The low interest rate provided by consolidation program is quite a money saver, unlike other interest rate schemes provided by banks or credit loans. A consolidation program also acts as an ideal key when it comes to repayment as a consolidation loan allows a longer repayment program which gives you the benefit of smaller payments and a time for planning and managing the payments.

A consolidation program also offers fixed interest rate and single payment monthly. This fixed interest and conversion of monthly payments into one payment acts as a benefit for students, in trouble-free as well as planned repayment and loan returns.

Repayment option:

Education loan repayment system is flexible and beneficial has been designed to meet the needs of each student. The two types of repayment options are:

-standard payment option
-graduated payment option

Mostly students and parents prefer standard payment option as with a standard payment option the loan payment remains same and does not change. If you have confidence of earning a job as soon as you graduate then with a standard payment you can pay back your entire loan with relaxed mind. But if you are not sure of finding a job so soon then you must go for graduated plan which offers low monthly repayment facility. In this plan you can look for a job while you are also paying small returns of your loan.

But just like any other like loan plan an education loan plan is also a pack of both advantages and disadvantages. Where in standard payment option you don't get any low payment facility, in graduated payment program your payment amount starts increasing after a specific time period which can put burden on you on a later stage. Thus it is very important for a student to think and opt for the most suitable repayment, option keeping in mind the various aspects of the option, in order to stay away from defaulted education loan. A defaulted education loan is a situation which comes when a student or the parent fails to pay or if the beneficiary is paying far less than required. A defaulted education loan can act as a trouble by affecting loan credit report or by burdening the interest rate.

An education loan can act as a right choice if you are dedicated and have planned your steps starting from the loan option to the loan repayment. Taking a loan for further studies and returning it after you start earning is an advantage you should not miss on, unless you have a wealthy relative or winning lottery ticket. But before a loan you need enough thinking and planning to sustain your journey of loan and loan repayment.