About Repaying Your Student Loans

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About Repaying Your Student Loans

Repayment plans have a lot of nuances. There are many options available, and some have limits or qualifications you must meet. You might find some to be perfectly molded to your economic situation.

Here is a general overview of the student loan world:

Types of loans

There are four broad types of federal loans available:

• Direct subsidized loans: These loans are need-based. They are for undergraduate students, up to a certain amount per year. Because they are loans, interest must be paid on them, but the government pays the interest for you while you are in school.
• Direct unsubsidized loans: These loans are for both undergraduate and graduate students. They are not need-based. Because they are unsubsidized, you must pay the interest on them you are in school. These loans are available in higher amounts than subsidized loans.
• Direct PLUS loans: PLUS loans are available to two types of borrowers: parents of undergraduate dependent students, and graduate students. The maximum amount you can receive is the cost of attendance minus any other financial aid you receive.
• Direct consolidation loans: These loans are for borrowers who want to combine existing loans into one loan. A loan like this may enable you to lower your monthly loan payments after graduation.

The importance of making timely payments

Once your payment period begins, it is important to treat your student loan just as you would any other loan. Failure to pay has major consequences. If you are not the disciplined type, an option to consider is electronic payment, in which your bank or credit union automatically and regularly deducts your payments from one of your deposit accounts. An advantage of this approach (provided that you keep sufficient funds in the account) is that it can reduce the overall amount of interest you pay. Your loan servicer can assist you with setting up electronic payment.

Want more information about your loans?

The US Department of Education’s National Student Loan Data System provides information on your federal loans, including loan types, disbursed amounts, principal and interest, and the total amount of all your loans. You can access the site at https://nsldsfap.ed.gov/.

If you have difficulty repaying your student loans

Sometimes bad things happen in life. Sometimes you can’t make payments on your loan. In this case, you have options. You can change your repayment plan, you can request a deferment or forbearance on your payments, or you can change the size of the payments or the payback period. In some cases, cancellation is an option, but this comes with strict requirements.