Education Loan

Education Loan

What Is an Education Loan?

An education loan is a sum of money borrowed to finance post-secondary education or higher education-related expenses. Education loans are intended to cover the cost of tuition, books and supplies, and living expenses while the borrower is in the process of pursuing a degree. Payments are often deferred while students are in college and, depending on the lender, for an additional six-month period after earning a degree. This deferment period is also referred to as a "grace period."

How an Education Loan Works

Education loans are issued for the purpose of attending an accredited college or a university to pursue an academic degree. Education loans can be obtained from the government or through private-sector lending sources. Federal loans often offer lower interest rates, and some also offer subsidized interest (meaning the United States Department of Education pays the interest on the loan while a student is in college at least half-time).1 Private-sector loans generally follow more of a traditional lending process for applications, with rates that are typically higher than federal government loans.