Student loans are often necessary but, can become very overwhelming if you do not understand all of the terms involved. Educate yourself on the process before you make any firm commitments. Continue reading to understand what you should know before borrowing.
Understand the grace period of your loan. The grace period is the time you have between graduation and the start of repayment. Having this information will help you avoid late payments and penalties.
Read the fine print on student loans. You need to stay on top of your balances, your lenders and the repayment status in which you find yourself at any given time. All these details are involved in both repayment options as well as forgiveness potentials. It will help you budget accordingly.
Maintain contact with your lender. Always update them anytime your address, email or phone number changes, which can happen a lot during college. Also, make sure that you immediately open and read every piece of correspondence from your lender, both paper and electronic. You need to act immediately if a payment is needed or other information is required. You can end up spending more money than necessary if you miss anything.
Do not worry if you are unable to make a student loan payment because you lost your job or some other unfortunate circumstance has occurred. Many times a lender will allow the payments to be pushed back if you make them aware of the issue in your life. Just remember that doing this may raise interest rates.
Think about getting a private loan. Public loans are great, but you might need more. There’s much less competition for private student loans, with small pockets of money sitting around untapped from lack of attention. Investigate around your community for private loans; even a small one can cover room and board for a term or two.
Don’t panic if you have a slight hiccup when paying back your loans. Job losses and health emergencies are part of life. There are forbearance and deferments available for such hardships. Just be mindful that interest continues to accrue in many options, so at least consider making interest only payments to keep balances from rising.
Pay your loan off in two steps. The first thing you need to do is be certain that you are making the minimum required monthly payment on each loan. Second, if you have any extra money, use it to make extra payments on the loan that bears the higher interest rate rather than the one that bears the highest balance. This will reduce how much money spent over time.
If you plan to prepay your loans, try to pay those with the highest interest rates first. If you focus on balances instead, you might neglect how much interest you accrue over time, still costing you money.
Your loans are not due to be paid back until your schooling is complete. Make sure that you find out the repayment grace period you are offered from the lender. For Stafford loans, the period is six months. Perkins loans give you nine months. Other types of loans may vary. Know when you will have to pay them back and pay them on time.
Make sure your payment option fits your specific situation. Many student loans come with a ten year length of time for repayment. You may discover another option that is more suitable for your situation. For instance, you can take a longer period to pay, but that comes with higher interest. You could also make payments based on your income. On occasion, some lenders will forgive loans that have gone unpaid for decades.
When it comes time to pay back your student loans, pay them off from higher interest rate to lowest. The loan with the most interest should be paid off first. Make extra payments so you can pay them off even quicker. There are no penalties for paying off a loan faster.
There is a lot to know regarding taking out a loan. The choices you make now can affect you far into the future. Use these tips to make the best decision for student loans.