How to start paying your student loans: Paying of loans has bedeviled so many students over the years. This is not unconnected with the fact that some of these students did not get the adequate information concerning how to plan on paying their loans when they were in school.
Suffice it to say that, though your student loan payments may seem less disturbing when you are still in school, it is pertinent you know that it will not be long after school before your lenders start being on your neck and expect you to cough up those monthly payments.
What this means is that, if you have not planned for that expense, then you might be putting yourself in trouble.
As such, the aim here is to inform you on what you need to know about how to handle your student loans successfully when they kick in. Knowing how to plan and start paying student loans can set you on the path to responsible money management for life after school.
What Student Loan is all about
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.
It differs from other types of loans on the grounds that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. It also differs in many countries in the strict laws regulating renegotiating and bankruptcy.
Why you need a Student Loan
It is necessary we take a look at some of the most common reasons some students go for student loans. The following are some of the reasons;
1. Low and Great rates
Government student loans have low interest rates and you do not pay back until you are earning a certain amount. Similarly, with a private loan from someone like future finance, you benefit from lower, capped repayments in study.
2. Huge tuition fees
Another reason is because of the high costs associated with some schools. Thus, at a standard £9,000 per year, it’s highly likely you will need to take a loan, be it government or private, to afford you annual fees.
3. Cost of Living
The costs of living for three years (or more) can soon mount up, especially if you are studying in one of the big United Kingdom cities. A maintenance loan from the government or a future finance student loan can go a long way in helping you secure a good standard of living.
4. Peace of mind
Instead of worrying about next month’s rent, a good student loan can help give you a sensible long-term finance so you can stay relaxed, energized and focused on your studies.
5. Helps Invest in the Future
Higher education is increasingly seen as an investment in your future. Thus, you are not to deprive yourself of the life and career you really want because you do not have the money to pay for it right now. A smart, flexible student loan can help you realize your potentials and achieve your goals.
When to Begin Repaying Your Student Loans
Most student loans have a six-month grace period, which means you will not have to start making payments until six months after your graduation, drop out or drop below half-time status.
The grace period is meant to give you a chance to find a job and begin earning an income before you are swamped with bills.
Some Tips to take note of when Preparing to Pay student Loan
When in school it is advisable that you start planning on how to pay your loan as a student. Below are some vital tips you should be conscious of when planning to pay your loans as a student;
- Endeavor to use the grace period to research student loan repayment options.
- Create a budget built around your student loans.
- Prioritize paying off student loans.
- Always keep tabs and communicate with your loan servicer.
- If possible, set up automatic payments to avoid late fees.
- Very important, please avoid student loan default at all cost.
- Never forget the exact date when you expect to pay off the loan and give yourself a target ahead of that. This will stand as a guide for you to follow.
How much you need to Pay each Month
In order to have a better means of paying your student loan, you should know that your minimum monthly payment is based on the type of loan you took, the amount you owe, the length of your repayment plan and your interest rate.
For federal loans you will typically have 10 to 25 years to repay entirely. However, shorter lengths of repayment time or larger loans will result in higher monthly payments.
The Standard 10-year repayment plan is by far the most popular plan with 11.37 million borrowers enrolled in 2017, but that doesn’t mean it is the best plan for you. This is the default plan.
It is advisable you make fixed monthly payments for 10 years. It is a great plan if you can afford the monthly payments and the cheapest option long term because you will pay a lot less interest.
As for making additional payments, you can always pay any amount more than the minimum payment each month. There are no penalties for early repayment, and taking this approach can save you a significant amount of interest over time.
How to make Payments
Once bills are due, you will be responsible for sending your monthly payments to the companies that hold your loans.
If you do not know where to send a payment, check with your school’s financial aid office. The financial aid office will be able to tell you who your loan servicers are. You can then contact your loan servicers directly with specific questions.
Be aware that your payments are due even if you do not receive the bills. If you move after graduation, tell your loan servicer your new address to ensure that you receive bills and can stay on top of your payments.
Consequences of not Paying your Student Loan
Bear in mind that student loans never disappear. There is no statute of limitations, and student loans are rarely discharged even in bankruptcy. With few exceptions, your student loans will follow you through life, until you pay them off.
In federal student loan, if you make a late payment you may be responsible for a late fee of 6% of the payment. Thus, defaulting on federal student loans will result in more severe penalties. Late or missed payments will also show up on your credit report and can harm your score.
Another consequence is that you are considered delinquent when you have not made a payment in 90 days. When you have not made a payment in 270 days (nine months), you go into default and suffer a lot of consequences for it.
The government can garnish up to 15% of your wages and social security benefits, as well as offset income tax refunds. The government may also deduct 25% of each payment for collection fees, making the loan cost significantly more.
In a nutshell
In a nutshell, student loan, though very necessary in helping one achieve his or her goals of been educated, if it is not upset appropriately and in due time can bring some discomforts. Thus, as a student, you are encouraged to pay your loan in time.
The best time to start preparing on how to start paying your student loan is the exactly the moment you applied and received it. This will help you stand a better chance.