Education Loan

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DEFINITION of 'Education Loan'

Money borrowed to finance education or school related expenses. Payments are often deferred while in school and for a six-month grace period after graduation. Sallie Mae is the largest source of education loans and handles the two major types, the Stafford loan and the Perkins loan. One of the major benefits of these types of loans is that they come with low interest rates and do not require collateral or a credit check.






INVESTOPEDIA EXPLAINS'Education Loan'

Sallie Mae acts as a secondary market for student loans. The money from a Sallie Mae loan is not actually lent to the student or their parents by the government. Once the loan has been completed, the lender will then sell the loan back to Sallie Mae in order to free up their funds to help additional students.




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RELATED FAQS
  1. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  2. What are the differences between delinquency and default?

    Delinquency and default are loan terms that describe failure to make a required payment. A loan in delinquency occurs the ... Read Full Answer >>
  3. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  4. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  5. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  6. How does accrued interest work on student loans?

    Using private and federal student loans to finance a college education is a common funding strategy, but students are often ... Read Full Answer >>

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