Educational loans are a form of financial aid to college students in form of borrowed money from banks and other financial institutions offered to both federal or government sponsored students and privately sponsored students which are intended for educational expenses only such as college tuition, course work books, lecture notes and living expenses. They are repaid with an interest included which is calculated according to the set interest rate. Educational loans are a vital piece of the students’ financial source as they enable him/her to pay all necessary tuition fees which enable them to attend their respective classes, and eventually graduate at the end of their time in college. This ensures that they get a quality education and later a job which would then make them financially independent making something out of them.
Educational loans have fixed interest rates which is a crucial advantage when compared to other loaning schemes. This is so because the student does not have to worry about rises in interest rates making the loans tougher to payback. These interest rates are also significantly lower when compared to other loans awarded in various other schemes. Payments of the loans are flexible in the sense that the loaning organization, such as a bank can organize a monthly payment plan which makes the payment of the loan far much easier and affordable. Payment also occurs after a student has completed his studies so that they are able to concentrate on their studies and not worry about payment of the loan. The interest rate takes effect after completion of the time period in school by the student and not immediately after receiving the loan. Some organizations which are involved in the issuance of the loans may sometimes decide to offer the students who may be able to pay the sum owed in lump sum the chance to pay only they principle amount they received with no interest added.
However, educational loans also have a downside. The interest rate that is charged to these loans, though small and fixed, may cause a potential burden to payment for some of the students, since any charge, however small will ultimately cause an increase in amount to be paid. Payment defaulters may be charged in a court of law and charged with defaulting payments which were agreed upon. This may result in legal procedures such as auctioning of private property. A student’s guarantor of payment as contained in the loan payment plan may be bestowed upon the burden of the loan if the defaulter is not in a situation to pay the loan long after the loan’s due date matures. Over and above the fixed interest rate for the loan, the defaulters of these educational loans may be required to pay an additional charge for the delayed payment of the loan. This makes it even more difficult for a struggling defaulter to pay his dues.
Based on the above facts, educational loans may be considered a safer and viable financial option if a student is able to obtain a loan that has a fixed and low interest rate and is sure about obtaining a job that will be able to cater for the loan payments he owes without being slapped with defaulters’ court cases and being subjected to auctions.
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