A student loan, also called an education loan, refers to money borrowed to finance an individual’s higher education. Student loans cover the cost of books, tuition fees, and accommodation while one is pursuing their higher studies. The repayment is usually deferred until the borrower completes their studies and may also be delayed for a maximum of 6 months after one finishes their degree. This is often known as the grace period. There are various benefits of these types of loans, and this article lists a few.
- Low interest rates
Interest rates play a crucial role when you are considering taking a loan or making a decision to refinance. The student loan interest rates are much lower than on other types of loans, so it is easier to pay them off. The lower interest rates are a result of the government providing a subsidy on the loan amount. Borrowers are also given a grace period of up to 6 months for repayment so that they can find a job after completing their degree. - No credit history required
Federal student loans do not monitor a borrower’s credit history before approval. The student’s family is required to fill a free application for federal student aid to be eligible to apply for a federal student loan. Experts say that one can easily meet the eligibility criteria for federal student loans as compared to applying for student loans from private sources. - Easy accessibility
Everyone is eligible to apply for an education loan, irrespective of their financial conditions or income source. Additionally, education loans are a popular way of financing higher education due to their easy accessibility and availability through various sources. There are several non-banking financial corporations that offer student loans without much of a hassle. Plus, the application process is simple, and the loan is issued within days after the verification is done. - Fixed interest rates
The interest rates on federal student loans are fixed, which means the rates cannot change throughout the loan repayment period. The fixed rates protect the borrower from incurring any additional costs in the repayment period and also prevent a sudden increase in their monthly installments if there is a change in the market rates. - Deferment or forbearance options are available
The Federal student loan program allows borrowers to apply for forbearance or deferment options to postpone or delay the repayment of their student loan. One can get up to 3 years for deferment and forbearance for a federal loan and around 6 months to one year in the case of loans from private banks unless there are other specific terms and conditions that they have agreed to. - Favorable payment terms and conditions
It is important to consider the repayment plan before taking any loan, and student loans are no different. Many loans need to be repaid immediately, but student loans come with flexible repayment options. The borrower is given a moratorium or a waiting period before they are obligated to make fixed monthly payments. This period allows them to find a job after the completion of the degree, and it is highly beneficial as students can repay the amount themselves once they start working.
The above-mentioned benefits of taking student loans make it clear that these loans have several favorable factors compared to other types of loans. They come with various other benefits, like self-dependence, which teaches a student to take ownership or responsibility for their studies. Additionally, the pay-as-you-earn repayment option instills a sense of accountability and responsibility in an individual. That said, one must also consider the cons of taking a student loan before filing an application.
