Student Loan
Borrowed money used to finance higher education that must be repaid with interest.
What is Student Loan?
A student loan is financing used to cover college tuition, fees, housing, and other education-related costs, repaid with interest after graduation or leaving school. Federal student loans — Direct Subsidized, Direct Unsubsidized, and PLUS loans — offer fixed interest rates, income-driven repayment (IDR) plans, deferment options, and potential forgiveness programs including Public Service Loan Forgiveness (PSLF). Private student loans from banks or credit unions typically carry higher rates and fewer borrower protections. Federal subsidized loans do not accrue interest while the student is enrolled at least half-time. As of 2024, total U.S. student loan debt exceeds $1.7 trillion across approximately 43 million borrowers, making it the second-largest category of consumer debt after mortgages.
Example
A student borrows $35,000 in federal Direct Unsubsidized Loans at 6.5% interest over four years. After graduation, she enters the standard 10-year repayment plan at approximately $397/month. Total repaid: ~$47,600 — including $12,600 in interest. Alternatively, enrolling in an income-driven repayment plan at $200/month saves cash flow initially but extends repayment and increases total interest, unless she qualifies for forgiveness after 10–20 years.