Student loan

What It Means

A student loan is money you borrow to pay for college or career school, which you pay back with interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more, usually starting after you leave school. There are two kinds. Federal student loansFederal student loanA student loan made by the U.S. Department of Education, with a fixed rate set by law and federal repayment plans and protections. See more come from the U.S. Department of Education and carry repayment plans and protections set by law; private student loansPrivate student loanA student loan from a bank or other private lender, priced by your credit and governed by its contract rather than federal student loan rules. See more come from a private lender, such as a bank, on terms set in your contract. Most federal loans don't require a credit check, while private lenders usually check your credit and often want a cosignerCosignerA person who signs a loan alongside the borrower and becomes legally responsible for repaying it if the borrower doesn't. See more, the Consumer Financial Protection Bureau (CFPB) explains.

How People Say It

• "I'll be paying off my student loans until I'm forty."
• "Are yours federal or private?"
• "My grace period ends in December, so payments start in January."

The Breakdown

Worked example. A graduate owes $30,000 at an example fixed rateFixed interest rateAn interest rate that's set when you borrow and stays the same for the life of the loan, so the monthly payment doesn't change. See more of 6.5%. Here is what different repayment lengths cost, rounded to the cent:

What the result means. Stretching from 10 to 25 years cuts the payment by about $138 a month and nearly triples the interest. On a federal loan, the Department of Education's new Tiered Standard plan sets a fixed term of 10, 15, 20 or 25 years based on how much you borrowed, so on that plan a bigger balance comes with a longer schedule.

Where your rate comes from. Federal loans carry a fixed rate set each year under a formula in federal law for loans made that year, the same for every borrower with that type of loan. A private lender sets your rate from your credit, and it may be fixed or variable.

Good to Know

Federal repayment changed in 2026. According to studentaid.gov's page on the One Big Beautiful Bill Act, borrowers can use the new Repayment Assistance Plan (RAP) and the Tiered Standard plan from July 1, 2026. Which plans you can use may depend on when your loans were made, so check your own options on studentaid.gov before you choose. The CFPB also warns that moving federal loans to a private lender ends your access to federal repayment plans, defermentDefermentA formal pause on federal student loan payments for a qualifying reason, during which subsidized loans don't build interest. See more, forbearanceForbearanceA temporary pause or reduction in loan payments that a lender or servicer allows, while interest usually keeps building on the balance. See more and forgiveness programs.

Related Terms and Categories

• Federal student loan

  A student loan made by the U.S. Department of Education, with a fixed rate set by law and federal repayment plans and protections.

• Private student loan

  A student loan from a bank or other private lender, priced by your credit and governed by its contract rather than federal student loan rules.

• Income-driven repayment

  A federal student loan repayment plan that sets your monthly payment from your income and family size instead of from your balance.

• Loan forgiveness

  A program that cancels some or all of a loan's remaining balance once you meet its rules, most often a federal student loan program.

• Refinancing

  Replacing a loan you already have with a new one, usually to get a lower rate, a different term or a different payment.

• Amortization

  Paying off a loan through regular scheduled payments, each split between interest and principal, until the balance reaches zero at the end of the term.

Debt and credit