Which method of funding higher education accrues interest until it is paid back?

• A. Scholarships
• B. Grants
• C. Student loans
• D. Work-study programs

Answer: (C)

Verified step by step guidance

1. Understand the concept of student loans: Student loans are a form of financial aid that must be repaid with interest. Unlike scholarships or grants, which are typically non-repayable, student loans accrue interest over time until they are fully paid back.
2. Differentiate between the funding methods: Scholarships and grants are financial awards that do not require repayment, while work-study programs involve earning money through part-time jobs to fund education. Student loans, however, involve borrowing money that accrues interest.
3. Recognize the key characteristic of student loans: Interest begins to accumulate on the borrowed amount either immediately or after a grace period, depending on the type of loan (e.g., subsidized or unsubsidized). This is a defining feature of student loans compared to other funding methods.
4. Consider the repayment process: Student loans are repaid over time, typically after the borrower graduates or leaves school. The repayment includes both the principal amount and the accrued interest.
5. Apply this understanding to the question: Since student loans are the only funding method listed that accrues interest until paid back, they are the correct answer to the question.