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Repaying A Student Loan

Article on Repaying A Student Loan

Repaying a student loan is extremely important because it is often the first mark that will be left on a student´s credit history. By ensuring that it is repaid properly and efficiently, it will be possible to have a more level playing field later on in life when it may be necessary to get a home or any other type of loan.

Step 1: Grace Periods

After students graduate, drop below a half-time status, or leave school, they normally have six to nine months before they must begin to pay federal educational loans. Private school loans will normally require payments to begin 60 – 120 days after leaving school. When calculating when payments need to be started for each loan and loan type, the student first needs to know what the grace period is for each loan. For a Federal Stafford Loan (Direct Loan Program or Family Education Loan Program) there is a six month grace period. For Federal Perkins Loans there is a nine month grace period.

Step 2: Know Who to Pay and How Much

Students should list all loans, along with when the payments begin, how much they are, and what day in the month the payments are due so they make sure they start making payments on time. Students should have received information about their repayment by the loan provider when the loan is issued and many send out a reminder near the time payments begin. If you find that you have questions or don’t have all the information you need, the U.S. Department of Education’s National Student Loan Data System (NSLDS) provides information on all federal loans. Students can go to www.nslds.ed.gov for all information.

Step 3: Deferring Payments

The repayment time for all PLUS Loans will begin on the date the loan is fully disbursed, with the first payment being due within 60 days after the final disbursement. A graduate student PLUS Loan borrower (as well as the parent PLUS borrower) can defer repayments while the borrower is enrolled at least half-time, as well as six months after the student is no longer enrolled at least half-time. Interest that accrues during this period will be capitalized if it’s not paid by the borrower during the deferment for both of these loans. Students and parents can contact the school for details.

Step 4: Start Making Payments

When repaying a student loan, there are many negative consequences if payments are not received in a timely manner, and all payments should include the student’s social security number or the loan number. If payments are not received on time, not only will the credit history be negatively affected, but the maturity date of each individual promissory note will be accelerated. If this happens, the loan amount will become due in full immediately and the student is no longer eligible for deferment or forbearance arrangements. If a student finds that they are unable to make their regular payments, they should contact the lenders immediately to try to arrange different payment options.

Repaying a student loan on time, every time, is extremely important. Students who start their credit history off with defaulted student loans will find it affects the remainder of their credit history. If you are uncomfortable with your lenders current repayment plan, give them a call and try to work out something that will benefit both parties. Have a browse around this website for more information on student loans and how to make the most of them.