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Student Debt Guide: Types of Loans

Student Debt Guide: Types of Loans

What are the differences between student loans and other types of debt?

January 07, 2013

Student loans, federal education loans, credit cards, mortgages, home equity…the list goes on and on. It’s enough to drive a person mad!

From the different types of debt to the different types of loans, this financial information is something any borrowing student should be aware of.

Learn to decipher the definitions of debt so that you know what you’re getting yourself into before you sign on the dotted line.

What are the differences between student loans and other types of debt?

Student Loans:

• Long-term debt repaid over decades

• Unsecured

• Most allow the borrower to defer repayment on the student loans while the borrower is enrolled on at least a half-time basis and for six months after graduation

• If you default, the lender cannot repossess your education

• Most offer a slight interest rate reduction for borrowers who repay their loans through auto-debit

• Federal and private student loans are almost impossible to discharge in bankruptcy

• Federal education loans and some private student loans will cancel the debt if the borrower dies or becomes totally and permanently disabled

• Up to $2,500 a year in student loan interest may be deducted on federal income tax returns as an above-the-line exclusion from income, which does not require the taxpayer to itemize

Credit cards, Mortgages, Home Equity and Auto Loans:

• Repaid over months to years

• Auto loans are secured by the vehicle; a mortgage is secured by the home

• If you default on a home equity loan or line of credit, you can lose the home

• Usually require that repayment begin immediately

• Most forms of consumer credit do not offer auto-debit discounts (as with federal and private student loans)

• Credit card debt and other types of consumer debt can be discharged in bankruptcy

• Do not receive the advantage of canceled debt if the borrower dies or becomes totally/permanently disabled

• The interest on up to $100,000 of a home equity loan may be deducted, if the taxpayer itemizes

• The home equity interest deduction is subject to the Alternative Minimum Tax



Next page: What are the differences between federal and private student loans?


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