Student debt facts for kids

This chart shows how much student loan money people owed in the U.S. in late 2012.

Student debt is money that students owe because of their education. This money is usually borrowed to help pay for things like college tuition, books, and living expenses while studying. Students might borrow from a bank, a special lending company, or even the government. Sometimes, if a student leaves a school without finishing their classes, they might also owe money directly to the school.

What is Student Debt?

Student debt is like any other loan, but it's specifically for education. When you take out a student loan, you borrow money with the promise to pay it back later, usually after you finish school. This money helps many young people go to college or other training programs that they might not be able to afford otherwise.

Why Do Students Borrow Money?

Going to college or getting special training can be quite expensive. The costs can include:

• Tuition: This is the main fee for taking classes.
• Books and Supplies: Textbooks, notebooks, and other materials needed for learning.
• Living Expenses: If a student lives away from home, they need money for rent, food, and transportation.
• Other Fees: Some schools charge extra fees for things like using the library or student health services.

Because these costs can add up, many students and their families need help paying for them. That's where student loans come in.

How Do Student Loans Work?

When you take out a student loan, you don't just pay back the amount you borrowed. You also pay extra money called interest. Interest is like a small fee for borrowing the money. It's usually a percentage of the amount you owe.

• Borrowing: You get the money while you are in school.
• Grace Period: After you finish school, or sometimes if you drop below a certain number of classes, you usually get a short time (like six months) before you have to start paying back the loan. This is called a grace period.
• Repayment: After the grace period, you start making regular payments, usually every month, until the loan and all the interest are paid off. This can take many years.

Types of Student Loans

There are two main types of student loans:

• Government Loans: These are offered by the government. They often have lower interest rates and more flexible repayment plans. Some even offer special benefits, like not charging interest while you are still in school.
• Private Loans: These come from banks or other private lenders. They might have higher interest rates and fewer flexible options compared to government loans.

Why is Student Debt Important?

Student debt can be a big part of a young person's financial life after they finish school. While it helps many people get a good education and better job opportunities, it also means they start their adult lives with a debt to pay off. Understanding how student loans work can help students and their families make smart choices about paying for their education.