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How do student loans work?

I have 0 knowledge on how they work. #college #student #student-loans

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Thank you comment icon Hi Kim, I was not very conscience of the impact of student loans until after I graduated and started to pay them back. Fortunately, I attained a degree in Business where I had a high demand for my skillset to be able to pay it back but many people choose degrees in fields that do not make much money. Best of luck! Chris Chris Krol
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Kim’s Answer

Jessi,


When a person takes out a loan, they are borrowing money, and promising to pay it back. With traditional loans, the re-payments start right away. You make a monthly payment, usually the same amount each month, until you pay back all the money you borrowed, plus interest. Interest is the amount charged by the bank, so they make money off of having loaned you the money.


Student loans are regulated by the government, so they cannot charge too much interest. Rather than making payments right away, payments are "deferred" until a few months after you graduate, or are no longer in school.


Starting life with a huge debt over your head is a scary thought. Some students think they need to go live at a university to fully experience the college life, with no thought as to how they plan to pay it all back. If you are concerned about that, please explore all your options. Apply for grants, scholarships, and work-study. Consider going to a junior college first, which is less expensive. Consider working part-time while going to school, or even consider working full time while going to school part time. Some employers have tuition assistance programs. Some will help re-pay student loans. Also consider a career in the military, where you can get money for college. There are a lot of options. Please discuss them with the Financial Aid offices of the colleges you are considering, or your HS counselor.


Best of luck! Kim
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LaTerricka’s Answer

The best way I can explain this without getting overly complicated is like this:
Remember how you borrow textbooks from the library and if you return them late you get a fee?

Student loans are like that but you are borrowing a book for however long you plan on being in college and instead of paying for the book upfront because it costs too much the library says "hey , we can pay upfront so long as you pay us back with a little extra". Which sounds good in the moment until you realize that life does what it wants and this simple payback with something extra becomes you working for the library to pay off a book you borrowed so long ago that the extra money they wanted on the backend has exceeded the actual price of the book itself.
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