Student loans

Definition

Student loans are funds borrowed to pay for educational expenses, which must be repaid with interest. They often have varying terms and conditions based on the type of loan and lender.

5 Must Know Facts For Your Next Test

1. Student loans typically have a grace period before repayment begins, usually after graduation.
2. The interest rate on student loans can be fixed or variable, impacting total repayment amounts.
3. Loan amortization schedules detail periodic payments split between principal and interest over time.
4. Early repayment of student loans can reduce the total interest paid over the life of the loan.
5. Federal student loans often offer more flexible repayment options compared to private student loans.

Review Questions

• What is a grace period in the context of student loans?
• How does a fixed interest rate differ from a variable interest rate on student loans?
• Why might someone choose to make early repayments on their student loan?

Related terms

Grace Period: A set period after graduation during which no loan repayments are required.

Fixed Interest Rate: An interest rate that remains constant throughout the life of the loan.

Amortization Schedule: A table detailing each periodic payment on a loan, showing amounts applied to principal and interest.