Student Loan Facts & Figures
Student Loan Glossary
Why should you find out about student loans? Unless you're one of the lucky few who manage to
get full scholarships or who can afford to pay for your own schooling, you'll probably have
to borrow some funds in the form of student loans. Before you borrow money for school expenses,
you should learn a little bit about the student loan process. Here are some terms you need to know.
Borrower Benefits
Think of these in terms of a price break you get when you buy something and a rebate you
get after you buy it. A lender can charge an origination fee,
while a guarantor can charge an insurance fee. Not all lenders
and guarantors charge the same fees. Some don't charge any fees at all. That's a break you can get when
you first take out your loan. These fees are deducted before you see the money, so the lower the fees, the
more money you receive to pay for your education.
You can also get breaks when you start repaying your loan. Many lenders will charge you a
lower interest rate if you have your payments automatically deducted from your bank
account. They may also lower your interest rate if you make a certain number of payments on time, which
shows you're serious about repaying your loan. Sometimes lenders will not only reduce your interest rate
but also give you credit toward the principal. Other breaks are often tied to providing certain
professional services, such as teaching.
This is like an insurance company. The guarantor, sometimes called a guarantee agency, has
an agreement with the lender to pay off a student loan under special circumstances.
It's just like car insurance, only it's not as expensive. The guarantor
can charge you up to 1 percent of your loan as an insurance fee. KHEAA is a guarantor, and to help you
with your educational costs, does not currently charge an insurance fee.
This is the money you pay the lender for letting you use its money to
pay your education costs. It's just like the interest you pay on your car loan, only it's generally lower.
The lender is whoever loans you the money. It can be a bank, a credit union, or some other
financial institution.
This is similar to the points you pay to borrow money for a home mortgage. It helps cover
the costs the lender has to pay for doing business with you. Lenders can charge up to
a 3 percent origination fee.
Principal
This is the actual amount you borrow before the origination
fee and insurance fee are deducted. The interest you are charged will be based
on the principal.
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