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By Akansha Bhadula
Student loans can be a valuable investment in your future, but it's essential to understand the basics before taking one out.
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There are two main types of student loans: federal and private. Federal loans come from the government, while private loans come from banks and other lenders.
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Interest rates determine how much you'll pay back in addition to the principal. Federal loans have fixed rates, while private loan rates can be fixed or variable.
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Federal loans offer various repayment options, such as income-driven plans and loan forgiveness programs. Private loans typically have fewer options and may require immediate repayment.
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Federal loans have annual and lifetime loan limits. Private loan limits vary by lender and may require a co-signer.
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The Free Application for Federal Student Aid (FAFSA) is the application process for federal student aid. It determines your eligibility for grants, loans, and work-study programs.
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A grace period is a period after graduation or leaving school during which you don't have to make loan payments. Federal loans typically have a six-month grace period.
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Default occurs when you fail to repay your loan according to the terms of the promissory note. Delinquency occurs when you're behind on your payments. Both can have severe consequences.
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A co-signer is someone who agrees to repay the loan if the borrower can't. Private loans often require a co-signer, while federal loans do not.
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Loan forgiveness programs are available for federal loans for those who work in certain public service fields. Private loans typically do not offer forgiveness options.
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Stay informed and learn more about student loans through financial literacy resources, workshops, and counseling services available to you.
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Understanding the basics of student loans is crucial for making informed decisions about your education and financial future.
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