Chapter P6, Problem 3RQ

To determine

To explain: The different kinds of student loans and the ways through which students can make sure that they don’t borrow more than they can pay back.

Introduction: A student loan is a credit amount that is offered by different agencies or institutions to students for educational purposes such as tuition payment. Most of the time, institutions charge interest on this kind of loan.

Explanation of Solution

The major types of student loans consider federal student loans and private student loans which can be explained as follows:

1. Federal student loans: These loans are offered by the government and several students use these loans. This loan includes direct subsidized loans (for undergraduate students) and direct unsubsidized loans (for both graduated and undergraduate students).
2. Private student loans: These loans are offered by private sources such as banks or financial institutions to students and are more expensive than federal loans because these private institutions charge a high-interest rate on loans.

Through the following ways students can make sure that they do have not to borrow more than they can pay back comfortably:

1. By reviewing interest rates, it is easy for the students to know whether they can pay back the loan they are borrowing because high-interest rates on loans make it difficult to pay back.
2. Moreover, students can learn about the exact amount that they need to pay for their tuition fee or any other external fees and if students can manage or there is no emergency to take a loan of a large amount then they should cut down that amount and borrow the required amount only.
3. They should also consider other expenses such as living expenses, transportation expenditures, or any family expenses as well as financial aids or sources of income while borrowing study loan because they need to know all expenses and income to determine whether it is possible for them to payback loan amount which they borrow.