All About Student Loans

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The Learning Curve of Student Loans

For as long as there are people seeking a higher education, there will be a need for student loans. Record numbers of student loans are applied for each year, since colleges and universities around the world are filled with students who want to complete their degree in the field of their choice.

Student loan applicants include potential students, current students, and parents or other relatives of students. Very often, returning students seeking a second degree take advantage of student loans.


In this article, the topics regarding student loans are:

  1. Purpose of student loans
  2. Choosing a lender
  3. Alternatives to student loans
  4. Tips to save money
  5. Paying off student loans


Purpose of Student Loans

While there is a small percentage of the population that is fortunate enough to have cash on hand for a higher education, more people turn to student loans to pay for school. And for good reason, since the cost of a good education is very costly.


Student loans are used to pay the following education expenses:

  • Tuition
  • Books
  • Fees
  • Room and board
  • Transportation
  • Other expenses as needed


The cost for each and every expense to attend a college or university grows by leaps and bounds each year. Tens of thousands of dollars are spent at the end of four years; much more for graduate school. It is no wonder student loan debt goes hand in hand with home mortgages, auto loans, and other credit that adults owe, long after college graduation.


Choosing a Lender

There are various sources to find money to finance education expenses. Students can borrow money through government loans or private student loans. The differences in these lenders are:


Government loans

These type of student loans are guaranteed by the government in which the student lives. For instance, in the U.S., the federal government offers low interest loans which do not have to be paid until after graduation. Canada has a program called a Canada Student Loan Program (CSLP) through their federal government, as well as loans for students through individual provinces. In general, government student loans have more flexible repayment options and easier qualification requirements.


The majority of countries worldwide offer some sort of government loan program or subsidy for students that live in its borders. Each location has specific qualifications, rules, and repayment terms. Students should be sure to carefully research the requirements to obtain a student loan where they will live and attend school.


Private student loans

These are loans from lenders (other than government) that have loans specified for paying for post secondary education. The terms and protections of these loans are less flexible than government loans, and the repayment terms are more stringent. These loans are not guaranteed; approval is based upon credit rating, course of study, and the school that the student plans to attend.


Sources of private student loans include:

  • Banks
  • Credit card companies with separate student loan products
  • Student loan lending companies
  • Commercial lenders that lend to students in specific fields of study
  • Alternatives to Student Loans


Alternatives to Student Loans

There are other ways to find money for school that does not involve student loans. For instance, students can apply for grants, which is money that does not have to be repaid. Grants are awarded for a wide variety of reasons, such as ethnicity, gender, field of study, and grade point average to name a few. Usually, grants will not cover the full cost of a four-year education, but they can go a long way toward offsetting some educational expenses.


Loans from friends and family can also provide some much-needed cash for school, as well as working a part-time job. Again, these suggestions will help to some degree, but most students will need additional funding to supplement their education.


A full scholarship is a dream for any student or parent. A full scholarship means that the total cost for school is waived for the entire four years. Some scholarships also include incidentals like food, room and board, books, and so forth. There are also partial scholarships available and, while they don’t cover the entire cost, they go a very long way to cutting the expenses. With so many scholarships available in so many areas, it is a good idea to start applying for scholarships as early as the sophomore year of high school.


Tips to Save Money

Getting a college degree is extremely important, so students should do everything they can to ensure they make it to the finish line. Since money is one of the most common reasons people drop out of college, it is a good idea to find ways that will save money to increase the chances of success.


A few money saving tips include:

  • A college that is in the same state (especially a public university) is usually less costly. Although there are exceptions, it is an option worth looking into.
  • Save money by living off campus when possible. For students who must live on campus, buying used furniture, clothing, and electronics is economical.
  • Try to cook or prepare food in the dorm to save money on eating out.
  • Continue to apply for scholarships even while attending college; there are scholarships available for current students for future educational expenses.
  • Buy used textbooks and other materials whenever possible.
  • Think ahead. Take college courses in high school, or consider taking less expensive online classes for certain courses.


Any thinking outside of the box ideas can cut education costs. Students can ask friends or relatives for ideas and research online for suggestions from other students who are on a budget.


Paying off Student Loans

Millions of people are still paying student loans long after they have graduated from college. Depending upon the lender, the interest on the loans is adding to the cost of their overall indebtedness. It is important to know the interest and the terms of a student loan before committing to pay it back. For instance, some governments pay the interest on federal student loans for the entire time the student is enrolled. After graduation, the interest rate is paid at a fixed rate. However, many private student loans charge a variable interest rate. This can make a big difference when it is time to repay.


Students should know the rules of the loan when it comes to forbearance (delaying or postponing payments due to financial difficulty or other reasons) or loan forgiveness (the loan wiped out for reasons which may include the type of degree attained such as public service, or death or disability of the borrower). Most importantly, the consequences of not paying student loans should be taken seriously. In most cases, if a government loan is not paid, wages can be garnished and tax refunds can be taken to pay for the debt. Private student loans come with the same sanctions as all debts like personal loans, credit cards, and lines of credit. Nonpayment can lead to court judgements and the loss of assets.


Fortunately, there is no shortage of information about student loans online or in person.  Whatever age, location, or status of the student, it is possible to obtain a life changing college degree with due diligence and determination to finish.

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Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.