Student loans are a type of financial aid. Student loans are borrowed and must be repaid, with interest, just like car loans and mortgages.

Even with other types of aid, many students must rely on loans to help cover educational expenses, as most students do not receive enough grant and scholarship funding to cover all their expenses. Approximately, 66% of financial aid funding in the state of Texas comes from education loans.

Education loans from different sources have varying terms (e.g., interest rates, repayment plans, fees, and credit requirements). For example, Federal Direct Subsidized/Unsubsidized and Perkins loans have no credit or cosigner requirements and the interest rates are generally lower than other types of loans. Whereas, Federal Direct PLUS loans require good credit and have higher interest rates.