What to Expect When You’re Expecting… Student Loan Repayment
Think of your student loan as a tiny seed that was planted for your education. It grows into a living loan that you’re responsible for keeping healthy throughout its life and through repayment. Our tips will help you learn how to nurture that seed so that you and your loans can enjoy a healthy and prosperous life.
The Facts of Life for Student Loans
When does life start for a student loan? How does your student loan develop, and when is it most crucial that you pay attention and nurture its development?
Formation
Once you have accepted the loan terms and signed your agreement, student loan formation begins with disbursement, which is when your student loan is paid out each semester. At this point, your student loan doesn’t just pay for your school. No – it’s the twinkle in your eye when you talk about what you’re going to do after college. Your student loan provides the promise for your future and feeds your dreams.
For most student loans, while you’re in school, the loan is still developing into a living loan that hasn’t yet emerged into your world. It may not seem fully real to you yet. However, if you don’t take precautions before your loan is born, it may develop complications you don’t know about while you’re in school – things like accruing interest. With early awareness, you can decide to make interest-only payments and avoid having the interest capitalize (added to your principal balance)! This can save you thousands of dollars in interest later. Even if you can’t make all the student loan payments, you can save some money by making occasional payments.
Can’t afford to make any payments on student loans while you’re in school? That’s fine. Then just take good care of your education by finishing your degree on time, and nurture your financial health by minimizing your credit card debt and the amount you borrow for your education.
Grace Period
There may be an additional grace period (usually of six months) after you leave school before you need to start making payments on your student loans. If you think your grace period is your last hurrah before all your budget, time, and energy go toward nurturing the growing new student loan you’ve introduced to the world, think again. Interest will continue to accrue during your grace period and may be capitalized if left unpaid. If you possibly can, avoid these complications by making interest-only or full payments.
Preparing for Repayment
You probably didn’t think your student loan experience signed you up for multiples. But when you get to graduation, you find that all those little seeds that paid for your education will come due at various times and will have different conditions, sleeping habits, and diet restrictions (no, not really). But you may have multiple student loans to repay, and before they come due, it’s time to prepare the nursery.
How do you prepare a nursery for student loans? Start with making a complete list of which loans are due when, what the monthly payments will be, who you’ll pay them to, and how to contact their loan servicers – as well the student loan interest rates. There are often repayment plan options for different types of student loans, so explore your options, figure out how much your payments will be, and sign up for payment plan options that will help you take care of all your loans. The goal is to prioritize and plan for repayment so that you can keep all of your student loans healthy.
When Student Loans Get Sick
An unhealthy student loan is one that becomes delinquent. It may start because you can’t keep track of your different loans. Or maybe you can’t afford to make all your payments. You miss one payment, and then another. It may go on your credit report. Eventually if you don’t make a payment), it defaults. Now it’s really affecting your life. With a defaulted student loan, you’ll mourn the loss of your positive credit standing for years to come. You’ll think ruefully of it when you apply for housing and are denied, when you don’t get the final call back for that dream job, or when you’re denied a loan to buy a car to replace the one that just died.
Don’t let problems with student loan repayment get to that point. There are often options for payment relief or to consolidate or refinance your student loans to make it easier to keep track of them, and to make payments more affordable. If you’re having problems keeping up with your payments, contact your servicer for options available.
Quick Tips for When You’re Expecting (Student Loan Repayment)
You’re a smart college graduate, but you haven’t had student loans before. We know it’s a lot to take care of, to have all these student loans coming due around the same time. That’s why we put together these tips for when you’re expecting student loan repayment.
- Keep track while you’re in school (and definitely before your graduate!) of how much you’re borrowing, who your servicer is for each loan, what the interest rates are, which loans subsidized while you’re in school and grace, as well as who to contact if you have questions or concerns.
- Keep your borrowing to a minimum. These are real living loans that will eventually need to be repaid – whether you finish your degree or not, whether you find a job in your field, whether you like your job. Don’t live in denial now.
- Take care of complications early. If you identify interest accruing on un-subsidized loans (and at a high rate), take care of it with interest-only payments or occasional payments whenever you can make them during school and in your grace period. Every little bit helps. Avoid interest capitalization whenever possible. You’ll have more hungry mouths to feed later.
- Choose payment options before repayment. Figure out how much payments will be and how you will make it all work so that you can take care of all of your loans when they’re due.
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