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STUDENT LOANS
The concept of a loan is pretty straightforward:
first you borrow money, and then you repay it.
There are several types of student loans: federal, state
and private.
Before you borrow, it's important to understand all the
terms associated with a loan:
Principal: The concept of a loan is pretty
straightforward: first you borrow money and then you
repay it. The original amount you borrow is known as the
"principal" of the loan. But the amount you must repay
is more than the original principal that you borrow
because the lender charges you for the use of the money.
Interest: The additional charge on your loan is known as
interest. Interest accrues on the principal balance of
your loan. In addition, lenders may charge fees for the
use of the money.
Fees: Lenders often charge fees when you borrow money.
For comprehensive information on fees, visit
Understanding Fees.nw
Cosigner: A person who agrees to be jointly responsible
for repaying a loan along with the borrower. A
creditworthy cosigner often enables a borrower lacking
sufficient credit history to qualify for a loan. The
addition of a cosigner on a loan may result in better
loan terms (e.g., lower interest rate or lower fees).
The cosigner is equally responsible for the debt as long
as it is outstanding, unless he or she is formally
released from the obligation during repayment. A
cosigner is not required for a federal loans, but is
usually required for other types.
When comparing loans, compare them based on their total
cost: principal plus interest and fees.
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