Student Loan Definition

A student loan is a type of financial aid offered to students seeking some higher education. Student loans differ from grants or scholarships because they must be paid back at some future date. There are currently a huge array of student loan programs available, both from the federal government, many state governments, and even private companies.

Funds obtained may be either delivered to the student or may be sent directly to the university or other qualified learning center. Most student loans offer low, deferred, or both low and deferred interest while the student is attending school and do not require repayment until after the student has completed or left school. Even then, most student loans enjoy low interest rates.

Individuals defaulting on student loans are subjected to vigorous collection activities, and even a bankruptcy will not discharge debt obligations secured through most student loan programs. Although student loans are attractive to many students, individuals should realize that student loans are not "free money" and must eventually be paid back.