How Do Student Loans Work? Student loans are a useful vehicle for financing post-secondary education. But they should be used in conjunction with other forms of assistance, such as bursaries, savings and scholarships.
Understanding Student Loans
A frequently asked question by university students is: How do student loans work? One of the most common forms of educational financing is a student loan. Student loans are financial instruments meant to provide both full-time and part-time post-secondary students with financial support for their education. These loans must be repaid, as opposed to alternative forms of financial aid such as bursaries, grants and scholarships. Bursaries are based on financial need and scholarships are usually based on academic performance, but student loans are traditionally given to any student who applies as long as they meet specific requirements. These requirements usually depend on the student’s economic situation, dependency status, living conditions and the cost of tuition.
How do Student Loans Work: Repayment
Student loans are offered from a number of different institutions and are designed to help students fund their university or college education by providing funds at a low interest rate. Most student loans also have deferred payment schedules to allow students to secure an income before facing their repayment obligations. In Canada, graduates are usually given a grace period of six months before repayment begins, assuming they don’t re-enter studies at some point within this period. While provincial student loans do not incur interest during the grace period, federal loans often do.
National Student Loans and Provincial Student Loans
In Canada, student loans are offered by both provincial and federal government entities. The federal government funds the Canada Student Loan Program and provincial governments have their own bureaus, such as the Ontario Student Assistance Program (OSAP). The National Student Loan Service Centre provides information and assistance to students regarding the issuing of student loans and repayment.
Repayment Assistance
There are a number of repayment assistance programs available for students whose repayment responsibilities become unmanageable. Aside from the deferred interest grace period, graduates may apply for further deferral if their financial situation makes them unable to continue their monthly payments. Interest does not accumulate during this period. Additionally, some provincial loan programs allow graduates to pay only the monthly interest earned on their loan. This should be considered a very temporary measure, as it means that the loan’s principal remains untouched. Most student loan programs also allow graduates to choose and alter their monthly payments based on their current financial situations. This allows for more breathing room in negotiating repayment and keeps the stress of repayment at a relative minimum.
Evaluating a Student Loan
The answer to the question “how do student loans work” requires a number things to come under consideration, particularly when determining the value of a student loan. While repayment and interest rates are important considerations, student loans are best used in combination with other methods of financial aid, such as bursaries, personal savings, and RESPs. Overall, government student loans are excellent options for financing your education, but should be considered from a broader financial perspective.
