Student loans can lead to a dream education, but that can turn into a nightmare if you’re not smart about it. So educating yourself about student loans is best done before you sign on that line. Continue reading to understand what you should know before borrowing.
Find out what the grace period is you are offered before you are expected to repay your loan. This is the amount of time you have before the lender will ask that your payments need to start. When you have this information in mind, you can avoid late payments and penalty fees.
Know how long of a grace period is in effect before you must begin to make payments on the loan. In order words, find out about when payments are due once you have graduated. Knowing this will give you a head start on getting your payments in on time and avoiding hefty penalties.
Stay in contact with all lenders. Notify them if there are any changes to your address, phone number, or email as often happens during and after college. In addition, when you get mail from your lender, be sure to read everything. Take the actions you need to take as quickly as you can. You may end up spending more money otherwise.
Make sure you understand the fine print related to your student loans. This will help you with your balance and repayment status. These three things will affect future repayment plans and forgiveness options. This information is necessary to plan your budget accordingly.
Paying down your student loans should be done using a two-step payoff method. To begin, pay the minimum every month. Pay extra on the loan with the highest interest rate. This will keep your total expenditures to a minimum.
Don’t fret when extenuating circumstances prevent you from making a payment. Many times a lender will allow the payments to be pushed back if you make them aware of the issue in your life. If you take this option, you may see your interest rate rise, though.
Know how much time you have in your grace period from the time you leave school until you must begin paying back your loans. If you have Stafford loans, you will usually have about 6 months. For a Perkins loan, this period is 9 months. Other types can vary. Make sure you know how long those grace periods are, and never pay late.
Never do anything irrational when it becomes difficult to pay back the loan. There is always something that pops up in a persons life that causes them to divert money elsewhere. Lenders provide ways to deal with these situations. The interest will grow if you do this though.
Identify and specifically choose payment options that are suited to your personal circumstances. In the majority of cases, student loans offer a 10 year repayment term. If this doesn’t work for you, you may have other options. You might get more time with higher interest rates. Additionally, some loans offer a slightly different payment plan that allows you to pay a certain percent of your income towards your debt. There are some student loans that will be forgiven if you have not got them paid in full within 25 years.
Work hard to make certain that you get your loans taken care of quickly. First, be sure to pay the monthly amount due on each loan you have taken out. The second step is applying any extra money you have to your highest-interest-rate loan and not the one with the biggest balance. This will keep your total expenditures to a minimum.
Reduce the principal by paying the largest loans first. You won’t have to pay as much interest if you lower the principal amount. Pay the larger loans off to prevent this from happening. When you pay off a big loan, apply the payment to the next biggest one. When you apply the biggest payment to your biggest loan and make minimum payments on the other small loans, you have have a system in paying of your student debt.
The best way to pay down your student loan debt early is to focus on the loans that come with a higher interest rate. If you pay off the wrong loans first, you could end up paying more than you need to.
To make the most of a loan, take the top amount of credits that you can. To be considered a full-time student, you usually have to carry at least nine or 12 credits, but you can usually take as many as 18 credit each semester, which means that it takes less time for you to graduate. This will help in reducing your loan significantly.
Select a payment option that works best for your situation. Many loans offer a ten year payment plan. If this won’t do, then there are still other options. For example, you could extend the amount of time you have to pay, however you will probably have a higher interest rate. You may also have the option of paying a percentage of income you earn once you start earning it. Certain types of student loans are forgiven after a period of twenty-five years.
Stafford and Perkins loans are the best federal student loan options. These have some of the lowest interest rates. This is a good deal because while you are in school your interest will be paid by the government. The interest rate on a Perkins loan is 5 percent. Subsidized Stafford Loans will have an interest rate that goes no higher than 6.8 percent.
If you have more than one student loan, pay each off according to interest rates. The highest rate loan should be paid first. Using additional money to pay these loans more rapidly is a smart choice. There is no penalty for repaying sooner than expected.
PLUS loans are student loans that are available to graduate students and to parents. They have a maximum interest rate of 8.5 percent. These rates are higher, but they are better than private loan rates. This makes it a great choice for more established students.
Anyone on a strict budget who is facing the repayment of a student loan is put in a difficult situation. There are loan rewards programs that can help with payments. For instance, look into the Upromise programs called SmarterBucks and LoanLink. These are like programs that offer cash back, but the rewards are used to pay your loans.
Do not think that you can just default on student loans to get out of paying them. There are various ways that your finances can suffer because of unpaid student loans. For example, it can step in and claim a portion of your tax return or Social Security payments. They can also claim up to fifteen percent of your income that is disposable. You will probably be worse off than before in some cases.
Stafford and Perkins loans are the best federal student loan options. These are both safe and affordable. It ends up being a very good deal, because the federal government ends up paying the interest while you attend school. The Perkins Loan has an interest rate of five percent. On subsidized Stafford loans it is fixed at a rate no greater than 6.8%.
Be very cautious about private student loans. These have many terms that are subject to change. Oftentimes, you aren’t aware of the terms until after you have signed the papers. If you sign a contract without understanding the terms, you could be setting yourself up for heartache. Learn all that you can prior to signing. If a good offer comes your way, ask other loan providers if they can match or beat it.
PLUS loans are something that you should consider if graduate school is being funded. They bear an interest rate of no more than 8.5%. Although it is higher than Perkins and Stafford Loans, you still get a much better rate than one that is private. This is often a good alternative for students further along in their education.
Never rely solely on student loans in order to pay for college. You should save money and look for grants and scholarships too. Locate the numerous scholarship matching websites designed to assist you in locating the perfect scholarships and grants. Look as early as you can to have the greatest number of options.
In conclusion, you need to know as much as possible about student loans before getting one. Whatever choices you make may impact your future. Make smart choices and only take out the loans you absolutely need.
When you are filling out your financial aid application, make sure that you are positive there are no errors on it. This will impact the types of student loans that are offered to you. Talk to a financial aid representative for more advice on the process.
