Education loans are funding borrowed by degree seeking individuals enrolled in an accredited college or university. The term education loan is also synonymous with student loans. Generally speaking, undergraduates must be enrolled at least half-time to qualify for an education loan. Loan programs are divided into two main categories, federal and private, and can be used to cover college-related expenses.
Federal student loans require borrowers to fill out a Free Application for Financial Student Aid (FAFSA). The thorough application determines student eligibility not only for student loans but federally funded grants as well. Direct loans can then be awarded to the students in a subsidized or unsubsidized form. Parents can also borrow federally-backed PLUS loans to cover the expenses of their dependent's education.
Repayment of Direct loans begins after the student graduates from college or drops below half-time enrollment. PLUS loans, however, require immediate repayment by the parent or guardian with payments beginning no later then 60 days after disbursement. Lastly, students can obtain Stafford loans based on financial need whereas parents applying for PLUS loans qualify based on their credit history.
Private education loans can also be taken out by either students or their parents, depending on the loan program. There are numerous banks and various private loan programs for borrowers to choose from. Each lender utilizes its own application and adheres to a particular loan approval process.
Unlike the stricter deadlines of the federal loans, private funding can be applied for anytime of the year. The award amount is also greater then that of the federal loans, making private education loans a way for students to bridge the student aid gap between federal aid and education expenses.