Student Loans: What Every Student Should Know

For certain folks, student loans are simply part of life. However, a lot of people dread having to deal with the process, especially those who do not know much about these loans. This article can help educate you on the process.

Understand the grace period of your loan. This usually refers to the amount of time you are allowed after you graduate to pay back the loan. Having this knowledge of when your payments are scheduled to begin will avoid incurring any penalties.

Be aware of the terms of any loans you take out. Stay on top of what your balance is and know which lender you borrowed from, plus what your repayment status is. These facts will determine your loan repayment and forgiveness options. This will allow you to budget effectively.

Interest Rates

If you want to pay off student loans before they come due, work on those that carry higher interest rates. If you think you will be better off paying the one with the highest monthly payments first, you may be wrong. Best to look at the interest rates.

Check the grace period of your student loan. Stafford loans offer six months of grace period. Others, like the Perkins Loan, allot you nine months. Other loan types are going to be varied. This is important to avoid late penalties on loans.

Identify and specifically choose payment options that are suited to your personal circumstances. A lot of student loans give you ten years to pay it back. If this does not fit your needs, you may be able to find other options. For example, you might be given a longer time to pay. Keep in mind that this option comes with higher interest. You also possibly have the option of paying a set percentage of your post-graduation income. Some balances on student loans are forgiven when twenty-five years have passed.

Student Loans

Select the payment choice that is best for you. Most student loans have a ten year plan for repayment. You may discover another option that is more suitable for your situation. For instance, you can possibly spread your payments over a longer period of time, but you will have higher interest. Think about what you “should” be making in the future and carefully go over everything with a trusted adviser. The balances on student loans usually are forgiven once 25 years have elapsed.

Look to pay off loans based on their scheduled interest rate. Pay loans with higher interest rates off first. Do what you can to put extra money toward the loan so that you can get it paid off more quickly. Speeding up repayment will not penalize you.

Increase your credit hours if possible. As much as 12 hours during any given semester is considered full time, but if you can push beyond that and take more, you’ll have a chance to graduate even more quickly. This helps you reduce the amount you need to borrow.

Many people will apply for their student loans without reading what they are signing. If something is unclear, get clarification before you sign anything. This is one way a lender may collect more payments than they should.

Stafford Loans

The Perkins and Stafford loans are the most helpful federal loans. These two are considered the safest and most affordable. This is a good deal because while you are in school your interest will be paid by the government. Perkins loan interest rates are at 5 percent. Subsidized Stafford Loans will have an interest rate that goes no higher than 6.8 percent.

If you are in graduate school, a PLUS loan may be an option. These loans do not have a large interest rate compared to private loans. This is higher than Stafford loans and Perkins loans, but it is better than rates for a private loan. These loans are much better suited to an older student that is at graduate school or is close to graduating.

Forget about defaulting on student loans as a way to escape the problem. The government will often still get its money back anyway. They can take your income taxes or Social Security. They can also take money out of your paycheck. In a lot of cases, you’ll be in a worse place than you already were.

Many people have to take out a loan to go to college. Now that you’ve read this, you should know enough to make a good decision. Use this advice to make the student loan process simpler.