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What is a Student Loan? A Simple Explanation for Kids, Teens and Beginners

What is a Student Loan? Borrowing 101: Easy Peasy Finance for Kids and Beginners

Introduction to Student Loans for Kids and Teens

This video explains the concept of a student loan in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about student loans, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

What is a Student Loan - A Simple Explanation for Kids Teens and Beginners
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:

What is a Student Loan?

Student Loan for Kids Teens and Beginners - A Simple Explanation
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A student loan is a loan that you can take to pay for your college education.

With the cost of college education skyrocketing, student loans help people pursue their higher education dreams even if they cannot save enough to foot the entire bill.

A student loan can be used for tuition, room and board, books, and other costs related to college.

Who can apply for a student loan – the student, or the parents?

Typically, the student applies for the student loan. However, parents can also apply for some types of student loans.

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How long do I have to repay a student loan?

The most common duration for a Student Loan is 10 years, although it could be up to 30 years depending on your specific repayment terms.

How much is the interest rate on student loans?

As of mid-2020, the average interest rate for student loans is about 4.5%.

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In comparison, the average interest rate for personal loans, which can be used for pretty much anything, is around 12%.

What are the advantages of a Student loan?

Education and Student Loan for Kids Teens and Beginners - Advantages and Disadvantages
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The main advantage of a student loan is that it enables you to get an expensive college education, even if you cannot afford to pay for it upfront. This provides you an opportunity to earn way more over your lifetime – on average, people with a college degree make around 1 million dollars more over the course of their lifetime than people with just a high school education.

Student loans are also tax-friendly, because you can deduct up to $2,500 of interest from your income each year when you file your taxes.

One more advantage of a student loan is the relatively lower interest rate.

Are there any disadvantages of a student loan?

A student loan is a liability you take on early in life, well before you assume other liabilities like mortgage, car loan, etc. So your student loan payments can have a big impact on your lifestyle decisions later on in life.

Student Loans for Kids Teens and Beginners - Pros and Cons
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Another thing to consider is that a student loan is one of the few things you have to repay even if you declare bankruptcy – there’s no way around it.

Are there different types of student loans?

There are two types of student loans — federal student loans and private student loans. But that’s a topic for another time!

Video Featured in the Below Financial Literacy Course for Kids & Teens

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: What is a Student Loan

What is a Student Loan
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