For our US readers
Data shows that college education worldwide has gradually increased in the last decade. This phenomenon has resulted in many students finding educational, financial assistance as means for them to reach their collegiate dreams. Although taking on any form of debt is not ideal, some students took advantage of applying for student loans.
Before you give it a go, it’s imperative to understand and research thoroughly about student loans. Even if they could answer your financial problems to sustain your college education, it also entails a significant financial responsibility that you must take and think over seriously.
However, if you’re currently involved in a student loan and thinking about refinancing, sites like EducationData.org provide helpful resources to help you navigate the process.
Here are what you need to know about student loans:
You Can Find Ways To Be Relieved From Student Loans
Repayment plans are usually offered to those who have taken federally-guaranteed loans. However, if you’re under a private servicer and want to explore your options about repayments, you can call your loan company and see what relief services it can offer.
Some banks generously provide loan modifications to those who have been struggling to settle their student loans. Some loan companies also can temporarily postpone your payments when things get tough. All you need to do is communicate with them and explain your predicament.
Student Loans As Part Of Financial Aid
While many students automatically incorporate financial aid with grants and scholarships, student loans are part of it. It’s still a form of financial assistance, in which students will be helped out in paying for their tuition and other school expenses. Student loans are usually paid off after graduation.
Contact your university or school’s financial aid office if you want to know more about its student loan options. It might have been focusing on offering grants and scholarships upfront, exploring this option of financial assistance by asking about student loans to the school staff.
Two Kinds Of Student Loans
Student loans are divided into two types: federal and private. Federal loans are usually given out by the government. On the other hand, banks, private loan companies, refinancing companies, and credit unions provide personal loans.
You must first submit your FAFSA to explore whatever financial options will be available for you. Otherwise, you may opt for a private student loan if you feel it’s the best or most comfortable way to apply for a loan.
You Don’t Have To Pay Loans Right After Graduation
Borrowers don’t necessarily need to pay off their debt right away after obtaining their degrees. Most companies and federal government agencies will give you a six-month grace period so that you can adjust fully to your new work and the corporate world. This is a time when no payments are needed to be made, so you won’t need to feel the pressure of finding employment anywhere to start earning money to pay your bills.
However, it doesn’t hurt to learn some tips on managing your student debts as early as possible so that you can prepare for ways to save and pay your loan on time.
Student Loans Don’t Get Dissolved Through Bankruptcy
Unlike other debts, student loans don’t get terminated through bankruptcy. It’s a lifetime commitment which means you’ll be held responsible for it until you finally complete all payments.
One important thing to note, though, is that if in any situation, you won’t be able to make a payment on your student loan, the federal government has the right to claim some of your wages as an alternative payment for your debt. Thus, you should be mindful of your financial obligations to prevent it from getting this far.
Refinance For Better Terms
Loaners with outstanding credit records can refinance their loans for better rates. However, there are qualifications set as to how you’ll be considered as a good borrower. People with high incomes and good solid credit history will quickly be approved to get refinancing support. There are many merits if you qualify as companies can help you save on paying interests.
Consider Private Loans
One of the downsides of getting approved with a federal loan is that there may be some limitations of coverage, which means they might not cover all aspects of your educational expenses. In this sense, it might be better for you to consider applying for private student loans. You should contact your school first, as it usually has a list of preferred lenders that are secure for you to transact with.
Interests And Fees
The truth about student loans and all other types credits for that matter is that the amount you borrowed will include fees and interests. Federal loans will need you to handle the loan fee or a percentage of the entire loan amount.
Besides the loan fee, you must pay the interest rate, which will be accrued daily and added to the total amount you owe when you finally start repaying. Private loan companies usually set their interest rates differently, depending on your credit history or your co-signer.
Your School Can Handle Other Fees
Some schools pay out your debt after you sign a promissory note to repay the loan back. This might be an excellent option as it would be more convenient for you to transact with your school than the federal government or a bank.
Student Loans Will Only Be Used For Certain Things
Keep in mind that your student loan money should only be used for education-related expenses. This means you must not use it to buy a car or other things you don’t need for school. It’s intended to provide financial support to shop for books, clothing, or stationery.
This also means that the money should not be used for entertainment, party events, or vacations. You must be responsible for assessing your expenses.
Learn About Your Servicer And Payment Schedules
Your debt will be handled by a student loan servicer hired by the government if you’ve taken a federal loan. On the flip side, a private company or bank usually assigns a servicer or a third-party specialist to handle your loans and repayment plans.
It’s crucial to know all information about your company and servicer. Ask all the questions in your mind to be at peace with yourself and your future finances.
Federal Repayment Alternative Options
Refinancing plans are made available for you if you have taken a federal loan. When you realize that you can’t handle your monthly payments and bills, you may apply for an income-driven repayment plan. This will be based on your monthly income and may qualify you to have loan payments that are capped at 10, 15, or 20 percent. It could be stretched out for as long as 20 to 25 years. However, you must note that repaying it longer will mean you need to pay more interest.
Depending on your financer, some lenders provide a .25% reduction on your interest rate if you have set your repayments on autopilot. This means your monthly payment will automatically be deducted from your bank account when your due date has arrived.
Such an option is excellent in minimizing the risk of forgetting to pay and suffering the consequences of accumulated interests. With an automatic repayment set, you won’t have to worry about spending your money on something else. This is a more financially responsible way of handling your expenses and monthly salaries. This payment method might be part of how to pay off student loans faster.
Borrow the Appropriate Amount
Although there are usually caps for student loans, these amounts are computed based on factors such as tuition, fees, room, board, transportation, books, and other expenses. You should consider borrowing only the right amount of money, sufficient to cover all your educational costs. Otherwise, if you borrow more than necessary, you’ll be struggling to pay it back with higher interest rates too.
Another smart way to estimate your loan is to project and compute your future salary when you finally start working. It’s wise to consider keeping your payment at around 10% of your monthly income. You can research online resources for your salary ranges to assess and estimate your salary and payment plans more accurately.
Federal VS Private
Obviously, many students would want to choose federal loans as their first choice. You should emphasize this when you fill out the FAFSA form. The principal merit of federal loans is that you don’t have to show your credit history to qualify for a loan. They also provide a more flexible system of repayment plans which are limited on the side of private loans.
If all else fails, and you’re left with no other viable options, then it’s time to consider taking a private loan. But, before doing so, review and make sure to gather all information about it to avoid future misunderstandings and conflicts.
Selecting the best student loan option is not an easy task. There are many considerations you need to evaluate before coming up with the best decision. Educate yourself about student loans as early as possible to be prepared, and you must research and plan for how much you can borrow and how you think you’ll be able to repay.