There can be little doubt that student loans are an integral part of higher education at present. College is so costly that it is nearly impossible to cover the costs of tuition, room, board and books out of pocket. Luckily, the information below will help you make wise decisions when it comes time to take out a student loan to pay for your education.
Always be mindful of specific loan details. You want to keep track of your balance, who your lender is and any current repayment status of your loans. These three things will affect future repayment plans and forgiveness options. You have to have this information if you want to create a good budget.
If you can’t make a payment on your loans because of unforeseen circumstances, don’t worry. Typically, most lenders will allow you to postpone your payments if you can prove you are having hardships. Just remember that doing this may raise interest rates.
Pay your student loans using a 2-step process. First, ensure you make all minimum monthly payments. Next, make sure to apply additional funds to loans bearing the highest rates of interest, not necessarily the loans with the greatest balance. In this way, the amount you pay as time passes will be kept at a minimum.
Focus initially on the high interest loans. If you solely base your repayment by which ones have a lower or higher balance, then you might actually end up paying back more in the end.
Check the grace period of your student loan. Stafford loans typically allow six months. If you have Perkins loans, you will have 9 months. Grace periods for other loans vary. Know when you are expected to pay them back, and make your payments on time!
Choose payment options that best serve you. Most lenders allow ten years to pay back your student loan in full. If this won’t do, then there are still other options. You could choose a higher interest rate if you need more time to pay. You may negotiate to pay just a set percentage of the money you begin to earn. Sometimes student loans are forgiven after 25 years.
Prioritize your loan repayment schedule by interest rate. The loan with the most interest should be paid off first. By concentrating on high interest loans first, you can get them paid off quickly. There will be no penalty because you have paid them off quicker.
Lower your principal amounts by repaying high interest loans first. The lower the principal amount, the lower the interest you will owe. Stay focused on paying the bigger loans first. Once you pay off a large loan, use the money allotted to it to pay off the one that is the next largest. By making minimum payments on all of your loans and the largest payment possible on your largest loan, you will systematically eliminate your student loan debt.
Perkins Loan
The Perkins loan and the Stafford loan are the most desirable federal programs. They are the safest and least costly loans. They are a great deal because the government pays the interest on them during the entirety of your education. The Perkins loan has an interest rate of five percent. Stafford loans offer interest rates that don’t go above 6.8%.
If you try to get private loans with poor credit, you are sure to need a co-signer. You must then make sure to make every single payment. If you can’t pay, your co-signer will also be liable.
PLUS loans are something that you should consider if graduate school is being funded. Their interest rate doesn’t exceed 8.5%. This is a bit higher than Perkins and Stafford loans, but the rates are better for private loans. This is often a good alternative for students further along in their education.
Keep in mind that a college may have its reasons for pointing your toward certain lenders for loans. Schools sometimes lend their name to private loan companies for a mutual benefit. This is misleading. Schools may actually receive money from the lender of you end up taking out a loan. Know the terms and conditions of any loan you are considering before you sign anything.
Do not think that defaulting will relieve you from your student loan debts. The government has multiples ways to collect on debt. For instance, it could freeze your bank account. In addition, they can garnish your wages and take a significant portion of your take home pay. Many times you will put yourself in an even worse situation.
Get a meal plan on campus; this will save you money in the long run. This will prevent getting charged for extras and allows you to just pay a flat price for every meal you eat.
Student Loans
Student loans are increasingly becoming a necessary part of college. However, that is not to say that the process of determining which loans are best is something to be taken lightly. By learning about student loans, you can save yourself heartache later on.
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