Student loan vs bank loan - Research Paper Example

Flexibility of bank loans and federal loans - Federal loans are more flexible, starting from application to repayment process. Elements of loan forgiveness and guarantee in both loans - Federal loans are entitled to loan forgiveness and are guaranteed in case of death or disability. Bank loans are not. Interest rates – Federal loans have lower and fixed interest rates, while bank loans have higher and unstable interest rates. Counter-argument based on efficiency and student satisfaction – bank loans cater for all student needs as the loan amount is not fixed.

The application procedure of bank loan is not cumbersome. 3. Conclusion Importance of both the federal student loans and bank loans in higher education Future of the education aid in United States, in form of bank loans and federal student loans Name Course Instructor Date Student Loan Vs. Bank loans In most developed and developing countries of the world, students are considered for loans to facilitate their higher education. These are in the form of government student loans or the private loans, including bank loans.

This is one of the ways in educational policies to ensure higher education for all in a country. In the United States, student loans are provided under the federal student loans. . Forest observes that the state government plays the greatest role in financial aid for education of students in higher institutions of learning (259). However, he does not ignore the contribution of the private sector, especially banks, in offering students loans for their higher education. Nevertheless, Forest insists that the US federal government plays the most important role in financing students’ higher education as compared to the private sector, including banks.

For instance, between 1998 and 1999, the federal government was responsible for 70 percent of financial aid to college and university students in the form of student loans. This was a total of $46 billion, inclusive of student loans and grants (Forest 260). This therefore points to the great influence of federal student loans in higher education, with bank loans having a lesser influence. According to Forest, what makes federal student loans to be more preferable is their limited requirements and conditions for one to qualify for.

In the US, the federal student loans are easy to qualify for, and have fewer restrictions. On the other hand, bank loans are hard to qualify for and highly restrictive. For one to qualify for a bank account, they have to show a reliable credit history, and possess sufficient income as shown by one’s bank account balance. However, most students in the world are still young, with no reliable income or bank account balances, which can serve as collateral for the bank loans. This therefore makes student loans a good option for students, as they do not require any collateral as a qualification condition (Forest 263).

“Kiplinger’s Personal Finance” records that the flexibility of federal student loans