What is a student loan?

A student loan is defined as a form of financial aid that must be repaid. Unlike grants or scholarships, which are gifted amounts of money that do not require repayment, student loans are borrowed funds that students use to cover educational expenses such as tuition, books, and living costs. These loans typically require the borrower to pay back the amount borrowed, plus interest, over a specified period after they graduate or leave school.

The repayment aspect is key to understanding student loans, as failure to repay them can lead to serious financial consequences, including damage to credit scores and potential legal action. Therefore, recognizing student loans as a financial obligation rather than free assistance is crucial for students when planning their finances for higher education.