What Are Student Loans And How Do They Work – You cannot use student loans for any expenses like you can with a personal loan. Instead, these loans are designed to cover certain costs of attending college.
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What Are Student Loans And How Do They Work
Paying for higher education can be a huge financial burden — but student loans can ease that burden. Student loans can make it more manageable to meet the cost of college, but you can only use them for specific expenses.
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You can’t use student loans for all expenses like you can with a personal loan. Student loans are designed to cover certain costs of attending college. It’s okay to use student loans for some types of expenses, but a handful of expenses cannot be covered with student loan funds:
If you are unsure whether or not an expense will be approved, you can contact your credit servicer or lender.
In addition to limitations on what expenses are covered by student loans, there are also limitations on some of the approved expense categories.
Let’s take transportation as an example. If you already have a car when you start your studies, you can use student loan funds to cover vehicle maintenance and fuel costs. But you can’t use a student loan to buy a car. Similarly, food you buy at a grocery store may be subject to approved room and board costs (like lodging), but eating out at a restaurant may not.
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The following personal expenses are not eligible for federal student loans and are also likely ineligible with many private lenders:
Find out how much you will owe over the life of your government or private student loan by using our student loan calculator below.
With a $ loan, you pay $ monthly and a total of $ in interest over the life of your loan. You’ll pay a total of $ over the life of the loan, assuming you make all payments while you’re at school.
Many college students tend to live on a tight budget, and it can be tempting to use student loan funds to cover other expenses not directly related to attending college. Be careful here though: Using student loan funds for unauthorized expenses may violate your student loan agreement.
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When you sign a student loan agreement, you agree to use only the loan funds disbursed to you to pay for college education costs. If you use these loan funds inappropriately, the Department of Education or your private lender could terminate the loan agreement and demand immediate loan repayment.
Federal Pell Grants are not loans and therefore do not have to be repaid (except in certain circumstances). This means you can keep any amount of Pell Grant funds that you don’t use. For 2022-23, the maximum federal award for Pell Grants is $6,895. Completing the FAFSA can help you qualify for scholarships.
When you take out a student loan, the lender (whether public or private) pays the tuition directly upfront. The school then uses the loan or grant funds for tuition, fees, and room and board (for students living on campus).
Your school will pay the remaining funds directly to you, and you can use the remaining money to pay for your education expenses.
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Good to know: If you receive a student loan repayment and you don’t use all of the remaining funds towards education expenses, you can request a student loan repayment.
No, you cannot use student loan funds to make car loan payments. Travel expenses to and from school are eligible expenses, but you cannot use the loan money to buy a car. However, you can use the student loan funds to pay for gas and vehicle maintenance.
Yes, when you take out a student loan, you sign a loan agreement stating that you will use the funds for educational expenses. If you abuse federal student loans, you risk the Department of Education terminating the loan agreement and requiring immediate loan repayment. How private lenders deal with this situation can vary.
Yes, you can use student loan funds for some living expenses. Approved living expenses are, for example, room and board. This category can include food purchased from the grocery store.
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In some cases, you can use student loans to fund health insurance. Many schools require students to have medical insurance in order to enroll. Colleges and universities often offer an on-campus health insurance plan that you can sign up for if you don’t have outside health insurance. If you enroll in on-campus health care, the cost of that care will be added to your cost of care, which may be covered by student loans.
The companies in the table below are approved partner lenders. Whether it’s the borrower or the co-signer, you can easily compare interest rates from multiple private student loan providers without hurting your credit score.
Lender Ratings are evaluated by our editorial team with the help of our lending operations team. Lender evaluation criteria include 78 data points covering interest rates, loan terms, transparency of eligibility requirements, repayment options, fees, rebates, customer service, co-signer options and more. Read our full methodology.
Lower APR reflects automatic payment, loyalty bonus and interest rebate where available 10 Ascension Disclosures | 1Citizen Information | 2, 3College Ave Disclosures | 7EDvestinU Disclosures | 8Invested Disclosures | 9 Disclosures by Sallie Mae
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Jacqueline DeMarco has been a personal finance writer for over seven years and contributes to . He has contributed content to over a dozen financial brands including LendingTree, Credit Karma, Fundera, Chime, MagnifyMoney, Student Loan Hero, ValuePenguin, SoFi and Northwestern Mutual. Fill the financial aid gap with government student loans offered by your university and need to identify private student loan sources to fill the gap. While we advise students to seriously reconsider their college choices in the face of a lack of financial support, we have developed this publication for some of the private student loan providers for students who are sticking with their current college choices regardless of the cost.
We are providing a reprint of Mark P. Cussen’s publication Top Student Loan Providers. We do not endorse any of the student loan providers listed on this page. We advise students to research each student loan provider carefully and thoughtfully; understand the terms and costs associated with each loan; and whether their loans are forgivable or eligible for rebates or rebates.
Many students who take out loans to pay for college enter the real world after graduation and worry about paying off their student loans. One of the best ways students and parents can minimize their borrowing obligations is to research the best providers before taking out a loan. Although there is no definitive list of the best loan providers, this article will show you the ones that have been praised by consumers and financial help websites.
Any list of the best student loan providers should start with Uncle Sam. Government-subsidized student loans are often the cheapest — and in many cases the only — alternative for low- and middle-income students and families paying for college.
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Pell Grants and subsidized loans offer interest rates and repayment terms that are typically far better than anything found in the private sector, including forbearance, forbearance, and loan forgiveness programs.
For more information on state student loan programs, visit www.studentloans.gov. The site is packed with information and resources, e.g. B. how to get help and a calculator to estimate the loan repayment.
Initially, Sallie Mae (SLM) was a government sponsored company but now operates as a public company. Sallie Mae primarily offers private student loans for students, graduates and parents. In 2004, a new company called Navient (NAVI) emerged to service government-backed loans. They also offer family education loans for expenses associated with private school expenses from kindergarten through high school.
Their website offers information, products, and tools for saving, planning, and paying for college.
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This provider caters to private college student loans and tuition payment plans for thousands of K-12 schools. Nelnet (NNI) provides clients with educational services in the areas of loan administration, payment processing, educational planning and wealth management. Their website is packed with tools and resources to help borrowers determine where they stand financially and how to choose the best loan.
Some of the tools available include budgeting worksheets, identity theft prevention guides, and general money management training. It also provides answers to a comprehensive list of frequently asked questions and offers customer service support via email and phone.
StudentLoan.com differs from Sallie Mae in that it is owned and operated by Discover Bank (DFS). It was previously owned by Citibank until 2010. Student loans are just one of the many financial products and services offered by this company, best known for issuing consumer credit cards. . No credit application, origination, or late fees are required.
Offering comprehensive educational tools, articles and calculators for students and parents, the site offers a variety
Student Loan Terminology, Glossary & Vocabulary
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