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A student loan is a specific kind of loan that assist students in paying for their college. Students need to pay back the loan later, besides the interest that gets built up with time. They can use the money for tuition, books, room, board, and living expenses. However, a student loan is different from other kinds of loans because the interest rate of the former is remarkably lower. Students can take education loans through various private-sector lending sources and the government. Most often, federal loans propose lower rates of interest, and a few propose subsidized interest too. On the other hand, private-sector loans follow a customary lending procedure for application where rates tend to be higher compared to the federal govt. Loans.
Kinds Of Student Loans
Students can get access to two chief kinds of student loans; federal and private.
Federal Student Loan
The government issues federal loans, and many sources, such as schools, banks, state agencies, or credit unions, issue private loans.
Federal student loans are further divided into:
Direct Subsidized loan – A direct subsidized loan is an undergraduate loan that caters to students who have financial needs.
Direct Unsubsidized loan – This is a graduate or undergraduate loan where a student doesn’t require to demonstrate his financial need.
Direct PLUS loan – Parents can take this loan, or graduate students take it for themselves.
Private Student Loan
A private student loan is more expensive, and it carries a higher interest rate compared to federal loans.
What Is An Increased Loan Balance?
When the matter zeroes on student loans, then increased loan balance turns into a disappointing issue. Numerous students complain that their balances of student loans are higher compared to what they had borrowed. If the recent statistics are to be believed, then 50 percent of all borrowers of student loans face the matter of augmented loan balance. So, it becomes important to know what increases your loan balance. In a few instances, missed payments and late fees contribute to larger balances, and in several instances, the borrowers do not do anything wrong but end up suffering from a distended loan balance.
Factors That Contribute To An Escalated Loan Balance
Some factors that contribute to an escalated loan balance are:
Delay in repayment – A lender doesn’t ask students for immediate repayment when they borrow money, but it does hope for a specific amount of time. But in some instances, students delay the payment.
Make lesser payment compared to the requested amount – A student’s loan balance increases when a student pays lesser compared to what his lenders request.
Income-driven payments – If you wonder what increases your loan balance, then you ought to know that income-driven payments are another important factor. A federal income-driven plan allows a borrower to make payments according to his income, and this structure of repayment is not dependent on what a borrower owes.
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