Dealing With Student Loan Repayment
When you apply for financial aid, you hope against hope that you will be able to get a grant or scholarship. Why is this so? Because for these sorts of financial aid options, you don’t ever have to pay the money you get back. It’s like winning the lottery, except you have to use the money you receive to fund your education. But that’s all fine and well, because the whole reason you filled out the FAFSA and applied for financial aid is so you can afford school, right?
However, even if you get a student loan it can feel as though you never have to pay the money you receive back. I mean, you get this lump sum of cash and go about your merry way through college. You hardly ever feel the financial burden except when you’re short on the dough to pay for a late-night taco from the Mexican joint around the corner. Plus, most student loans have a grace period, which means you don’t have to pay a penny back for several months after you graduate.
But then the day comes. Six months after you get your trusty degree, you find yourself opening that dreaded piece of mail—your very first loan bill. Say it isn’t so!
But you can deal with having a loan bill. In fact, it can be just another part of your life in a very short period of time. There’s no need to fret. But getting acclimated to paying this bill on time each and every month can be a bit difficult to get used to. The following should help you learn to get accustomed to being a responsible payer.
Know What You’re Getting Yourself Into
Before you ever sign your name on the dotted line of a loan application, federal or private, make sure you know what you’re getting yourself into. There’s nothing worse that borrowing money for school only to find out the interest has been accruing over the entire span of your college career, or that the interest rate is not fixed, so if you miss one payment you’re stuck making outrageously high payments.
These are things no one wants to have to deal with and if you play your cards right you won’t have to. What I mean by that, is you’ll need to put in the effort before you ever get a loan to avoid these sorts of sticky situations. If you are unsure of all of the terminology associated with getting a loan, then have a parent or other trusted individual go with you. They can help you avoid getting trapped in a loan contract that does you no good. Also, if any terms are mentioned that you don’t quite understand, ask!
Familiarize Yourself With the Borrowing Process
Again, before you sign your name to a loan, take some time to familiarize yourself with the entire process of borrowing money. Now this doesn’t just mean knowing you have to pay the money back some day. Rather, it means you need to understand what you will be responsible for. It also means you need to know all of your options. This way, in case the worst should happen and you are unable to afford your loan, you’ll know who to call and what to do to keep your loan afloat, to keep your credit in check and to stay out of default.
Know Your Repayment Options
You should definitely take some serious time to know and understand every last one of your repayment options. So many people think that all they need to know is that in so many months they’ll have to pay a designated amount per month on their loan until it is paid off. However, this is only the tip of the iceberg when it comes to student loan repayment.
In fact, how you pay back your money will depend a lot on how much you can afford to pay each month. If you are financially healthy, then the standard repayment schedule would probably fit the bill for you. If you expect to make more money in the future but currently can’t afford a high bill, then the graduated repayment plan is perfect for you because it starts you off with low payments and slowly increases over time to adjust for your progression through a career.
Income contingent plans are perfect if you are knowingly taking a career in a field with a lower salary, while the income sensitive plan can help you build a payment schedule that custom fits into your monthly income.
You see now why it’s so important to be aware of your options? If you’re not, you could very well go into default without even realizing you could have applied for an income sensitive plan or even a forbearance or deferment if the need should have arisen.
Have Your Own Repayment Plan
Besides knowing the repayment plans available to you, you should take some time to come up with your own plan as well. No, this isn’t something you’re going to pitch to the bank. Rather, it’s a plan for your own financial health you should come up with before you ever put your first loan payment in the mail.
Things to consider when coming up with this plan include how much you can afford to pay on your loan per month, how much money you expect to be making after graduation and how much you will have to spend each month on rent, utilities and other bills besides your loan or loans.
You should also think about loan consolidation and if that is a viable option for you. If you took out more than one student loan, consolidating is definitely something to consider, just so you know.
Another thing to think about is saving. If you have a job while in college, why not set some money aside to cover your first few months of loan payments. That way, in case job hunting does not go as planned, you will at least have a few month’s worth of cash to make your initial payments.
So much of the loan process is planning. If you think about it, all you do is plan when it comes to finances. You have to plan out your expenses to make sure you can afford your tuition bill. When you can’t afford tuition in its entirety, you get a student loan to cover the cost. While you’re in college, you can plan how you will repay your loan and select a repayment option. Once you graduate, you’ll work on getting a job that allows you to afford all of your expenses and makes repaying your loan not such a hard hit to your bank account.
Dealing with repaying your student loan is all in the planning. With a good plan and an in depth knowledge of the process, you’ll be just fine.