Understanding Your Student Loan

When you start to look at financial aid for College, you may run into some words that you have never heard of before. Here is a list of some of the most popular student loans and financial aid terms.

Lender: This is the financial institution or agency that will be providing student loans or financial aid.

Annual Percentage Rate: This or otherwise known as the APR is the amount of the annual cost of the loan given. This will include all the fees and the interest. It is figured into percentage.

CoSigner: This is a parent who acts as a second signature on the student loans. If person who took out the loan doesn’t pay then the lender has a legal obligation to get the money from the cosigner.

Default: The default occurs when the borrower fails to pay the loan as promised to do so in the agreement of the contract. Defaulting on a student loan can happen when the student does not send in a deferment of forbearance request if they get into trouble.

Accrued Interest: This is the amount of interest that is accumulated from the time the loan was given.

Deferred Interest: This is the interest payment that is delayed while the person who took out the loan is unemployed. This type of interest can be most commonly on Federal and State Loan, not so much on Private Loans.

Forbearance: This occurs when a lender or the United States Department of Education for Direct Loans grants the borrower of the loan a temporary break from making the payments or they may grant a reduction of the payment for Federal Stafford Loan, PLUS Loan, Federal Perkins or Federal Direct Loans.

Subsidized Loans: This is a loan where the money is based on the applicants’ financial needs. With this type of loans you will not be charges any interest before you start to repay the loans. The United States Government subsidizes the interest until you graduate.

Grace Period: This is a period of time where you don’t have to start repayment of the loan. It is the period that begins the day after the loan becomes due. Every type of loan has a different grace period.

Fixed Interest: this is the best type of interest to have. This means that the interest on the loans will stay the same from the beginning of the loan to the end of the loan. The rates will never go up.

These are just some of the terms that you will need to know. When you are shopping around for a student loan it is important for you to understand all of the terms and agreements that you will be making. If there is anything that you don’t understand, ask. When it comes to these loans you want to make sure you fully understand the terms and the interest rates and the process of repayment. These loans are great for students since they help students get the education that they need. They can be difficult to understand, discuss them with your parents first.