Students are having to take out more loans to finance their education, but are becoming less confident in being able to pay the loans back.
Most student loans do not require a payment until after a student has graduated, but what about when students do graduate? After going four or five years without having to make a payment on a loan, it can be shocking and frustrating when the time does come to begin making payments.
However, there are ways to prepare for repayment of student loans before they end up a problem.
In order reduce the interest that must be repaid on a loan, begin by paying off loans that have high interest rates. If students with loans pay an extra $100 on a loan with 10 percent interest, it is almost the equivalent
of earning 10 percent back on that loan and could save $200 during the time of the loan, according to www.finaid.org.
Loan consolidation is another way to save money when repaying loans. By consolidating numerous loans into one, interest rates can potentially be reduced depending on how high the particular person’s credit score is, according to www.finaid.org. However, private and federal loans cannot be consolidated together.
Students are also usually offered payment plans including the Standard Repayment, which takes 10 years to repay, the Extended Repayment which is for 12 to 25 years, the Graduated Repayment in which low payments are increased every two years, and the Income-Based Repayment. The extended and income-based payment plans typically have the lowest monthly payments, according to the U.S. Department of Education.
Standard Repayment plans can be used for subsidized as well as unsubsidized loans and payments are set for at least $50 a month. This type of plan will save more in interest rates over time. The graduated repayment plan could end up costing more money over time because the payments are increased every month.
For those who intend to enter into a career in public services, there is a public service loan forgiveness policy for federal student loans for up to 10 years. This type of loan forgiveness would apply to those who are planning on being employed as a firefighter, EMT, police officer, military personnel or by the government, according to www.finaid.org.
Students who receive federal loans can also sometimes be offered deferment and forbearance, meaning that the repayment of loans can be postponed temporarily while the person goes back to work, is doing military service, or experiencing some type of financial hardship, according to the U.S. Department of Education.
In rare cases, loans can also be canceled if the university for which the loan was used is closed or for some teaching services.
