Student Loan Consolidation - Secured loan

A loan given in exchange for security is called a secured loan - this basically means that if you buy something like a house with a secured loan, then the lender can have confidence that he can get his money back because the loan is secured on the house - ie if everything goes wrong he sells your house to get his money. 

The advantage is that this often gives you a cheaper loan (ie a lower interest rate) than an unsecured loan.  The disadvantage of course is that your house or other security may be at risk!

Student Loan Consolidation - Unsecured loan

This is the opposite of a secured loan.  The lender takes all the risk as he has no way of guaranteeing that he will get his money back.  Consequently he charges a higher interest rate to cover this additional risk.  Swapping an unsecured loan - such as a typical student loan - for a secured loan can be good to keep costs down - but possibly not if there is a risk of you not paying it back and so putting your house at risk!

Interest rate

This is the price for borrowing the money from the lender.  The lender could invest his money elsewhere, but as he is giving it to you for a period of time he wants to get a return on it to cover the return that he could have got elsewhere, plus of course the risk that he doesn't get his money back at all!

Compound interest

This is almost magic!  If you are a saver then it is wonderful - if you are a borrower it is bad news!  What this means is that over time interest is charged (or earned) on the interest already charged (or earned) - ie if last year $100 interest was earned, then this year if everything else stayed the same then in addition to the $100 earned for this year, you would earn interest on the additional $100 from last year - so at 3% this would be $3.  So in year one you earn $100 but in year two you earn $203 and so on...this is great when it works in your favour, such as investing in a pension plan.  It is very expensive if you owe money - so paying off the current interest on a loan is essential to stop your debt increasing further.

Monthly payments

This is the amount paid each month towards the loan - probably most of it is going to paying off the interest charged for that month and then any excess pays off some of the original amount borrowed.  Typically over time the proportion going on interest reduces and the amount paying off the original loan increases even though the monthly payment stays the same.

Grace period

This is the period of time during which you do not have to make loan repayments after initially leaving school or dropping below half-time status, usually on Federal loans.