You might be offered loans before you’ve even celebrated your high school graduation. You might think this is a terrific thing. However, there are certain facets of student loans you need to be mindful of before signing up for anything.
Understand the grace period of your loan. This generally means the period after you graduate where the payments will become due. Knowing this allows you to make sure your payments are made on time so you can avoid penalties.
Always know all of the key details of any loan you have. Make sure you know how much you owe and how to contact your lender. You also want to know what your repayment status is. These details are going to have a lot to do with what your loan repayment is like and if you can get forgiveness options. This also helps when knowing how prepare yourself when it comes time to pay the money back.
It is acceptable to miss a loan payment if serious extenuating circumstances have occurred, like loss of a job. Most lenders can work with you if you lose your job. However, you should know that doing this could cause your interest rates to increase.
Pay off all your student loans using two steps. First, be sure to pay the monthly amount due on each loan you have taken out. Second you should pay whatever you’re making extra to a loan that has a high interest rate, not the one with a higher balance. This will reduce your spending in the future.
Grace Period
Know what the grace period is before you have to start paying for your loans. For Stafford loans, you should have six months. For Perkins loans, the grace period is nine months. Other loans will vary. Know when you will have to pay them back and pay them on time.
Choose the payment option that is best suited to your needs. Many student loans offer 10-year payment plans. If you can’t make this work for your situation, check out other options if you can. Understand if you choose a longer repayment period you will end up having to pay more in interest. You might even only have to pay a certain percentage of what you earn once you finally do start making money. There are even student loans that can be forgiven after a period of twenty five years passes.
Your principal will shrink faster if you are paying the highest interest rate loans first. You won’t have to pay as much interest if you lower the principal amount. Look at the large ones and see how quickly you can pay them off. When you pay off one loan, move on to the next. Making your minimum payments on every loan, and the largest you can on your most expensive one, can really help you get rid of student loan debt.
Make sure to understand everything about student loans before signing anything. You must ask the right questions to clarify what you don’t understand. This is one way that lenders use to get more than they should.
Be sure to fill your student loan application correctly. Giving incomplete or incorrect information can delay its processing.
PLUS student loans are offered to parents and graduate students. They bear an interest rate of no more than 8.5%. This rate exceeds that of a Perkins loan or a Stafford loan, but is lower than private lenders offer. It might be the best option for you.
Keep in mind that your school could have other motivations when they recommend certain lenders. Schools sometimes let private lenders use the name of the school. This is oftentimes quite misleading to students and parents. A school might get a kickback for you signing up for that lender. Make sure to understand all the nuances of a particular loan prior to accepting it.
Forget about defaulting on student loans as a way to escape the problem. The government has a lot of ways it can try to get its money back. For instance, it can claim portions of Social Security or tax return payments. The government can also lay claim to 15 percent of your disposable income. In many instances, you’ll wind up in a position that is worse than where you started.
College can give you a lot of debt over the four years you are there. If you choose to borrow more than you actually need and getting loans at higher interest rates could create some pretty big issues. So, it’s important to remember these tips when you go to college.
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