What are student loans?
Student loans are loans provided to a student for the purpose of paying for education-related expenses.
The annual cost of a university education, including tuition, fees, housing, food, books and supplies, is in the United States $22,826 if you are enrolled in a state-funded university and $44,750 if you are enrolled in a private university. Some private schools can even charge more than $60,000 a year.
While the cost of higher education is affordable for some, most students need financial help to finance their dreams of a college degree. In fact, according to current statistics, of the 20 million Americans who attend college each year, 60% or 12 million need some form of financial aid/loan.
Where do the Loans come from?
The most popular source of student loans comes from federal student aid from the US Department of Education.
Here are the basic requirements for federal student aid student loan eligibility:
- Have a latent financial need. (Financial need = cost of attending college minus your family's expected contribution)
- You must be a US citizen, US national, or have a Green Card.
- Have a valid social security number.
- Be enrolled in or accepted a degree or certificate program.
- 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.
You are probably wondering, “Is it really worth going to college if I need to get a loan?”
The answer is yes. First of all, a federal student loan has a low interest rate. Second, by going to college, you will be securing your future. Earning a college degree substantially increases your future earning potential. According to the National Center for Education Statistics, among a group of young people ages 25 to 34, the average college graduate earns 114 times more than someone with only a high school diploma.
- Americans owe more on student loan debt than on credit card debt.
- Currently, more than 40 million Americans have student debt. The population with student loans is actually larger than the entire population of Canada, Poland, North Korea, Australia, and more than 200 other countries. It is also four times larger than the population of Sweden.
- One survey found that 27% of those with student loan debt move back in with their parents after college.