Student Loan

There are a number of ways students are able to finance their education. There are government-funded loans available to students, grants, and bank loans. A student loan is a sum of money lent to an individual to enable them to pay for a higher education qualification, such as a Degree, PhD or a Masters.

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What does a Student Loan offer?

Education can be an expensive business, so student loans are the way may people choose to fund their education. A bank student loan can also be used to consolidate the debts you may have built up as a student. These graduate loans are generally available to borrowers up to 5 years after graduation.

If you are still in education, a student loan does not need to be repaid until after you have completed your studies, allowing you to complete your studies without the stress of meeting repayments. In some instances, your parents may be asked to be co-signers on your loan. This means that your parents act as the backers for your loan.

Once you have completed your studies, you will be expected to start repaying your loan. You do not have to be in employment before taking out a student loan, or while you are in university or college. The lender is investing in your future, and lends you money that after you have completed your studies, you will enter paid employment, allowing you to repay your loan.  

One of the key problems facing the lenders is the lack of credit history of the borrower, and the changeable nature of the employment market. However, they take this risk hoping that those with a higher level of education will be more viable employment candidates, and this will make them good customers in the future.

There are some key differences in applying to a bank as opposed to the government for a loan are the terms under which your loan is paid. For example, the government will usually ask you to pay back your loan once you have reached a minimum income threshold. Banks will ask you to repay your loan in a more rigid manner and will require you to make regular monthly repayments. 

The APR (Annual Percentage Rate) for government student loans is linked to the rate of inflation, so students will only pay back the amount they actually borrowed, whereas the rate of interest for the bank will be higher than this.

As with any loan, carefully consider the implications of taking out a student loan before committing to it.

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