Student Loan Repayment Options
Loan repayment is one of those things that every student fears as they approach graduation. However, there are many ways that a student can successfully manage their education loan repayment in order to best fit this expense into their budget. For example, students who have borrowed from federal student loan programs will be able to select from three repayment plans; traditional, graduated and income sensitive repayment.
Traditional repayment basically means that the loan principle and interest payments will be equal for the life of the loan. The student will make the exact same payment, every month, until the loan is repaid in full. The minimum payment amount with this repayment option is $50 per month, with the exception of Federal Perkins Loans.
Graduated repayment allows student who are experiencing difficulty meeting the required payment for the traditional repayment plan. Graduate repayment means that the student will begin repaying their loan with a lower payment amount and the amount will gradually increase throughout the life of the loan. One of the requirements with this type of repayment is that no single payment can be over triple the amount of your lowest required payment.
Income-Sensitive Repayment is an excellent option for recent graduates who are experiencing minor financial hardships. The payment amount is determined by the student’s income and expenses.
In all of these cases, the loan must be repaid in full within ten years of graduation, not including the standard six-month grace period after separation.
If you have considered all of the options above, and repaying your loan is not feasible at this particular time due to financial hardships or other considerations, you might want to consider delaying repayment with either a forbearance or deferment. Both are options for federal student loan borrowers who are experiencing temporary difficulties.
Another option that will increase convenience for borrowers who are in repayment is loan consolidation. Loan consolidation basically just takes all of your current student loans and combines them into one larger loan. There are both federal and private student loan consolidation loans available – and depending on the type of loans you have borrowed you may or may not have the option to select from either. Consolidation loans offer convenience, because there is only one monthly payment instead of several.
Not every option for repayment is right for every student, and depending on your specific situation there may be circumstances which dictate certain repayment choices. It is important to communicate with your lender in order to select the best repayment type for you.