Understanding Student Loan Repayment
Everyone who graduates from college and/or graduate school with any kind of loans will have to come to grips with repaying student loans. Understanding how and when questions about the loans will help you with the repayment process.
Graduation day is a big day for all school students – from Kindergarten through graduate school. For college graduates and graduate school graduates, it also means that they have six months to begin to repay any loans they have taken out for their schooling. Depending on your degree program, you may have up to a year to begin repayment, but most are due beginning in six months. If however, you drop below half-time status as a student, even without graduating, your grace period will kick in and you will need to be prepared to begin paying on the loans at the end of the stated grace period.
For the college graduate, repaying student loans will be affected if you decide to go to graduate school following college. This will extend your college loans by deferment. This means that there will be no principal payment due on the loans while you are furthering your education and on subsidized loans, the government will pay the interest that accumulates.
If, however, you do not go to graduate school, you need to look closely at how many loans you have and their amortization schedules. It could be that consolidating your student loans would save you money. When you consolidate the loans, you may extend the payment period for up to 30 years, depending on the total loan balance you consolidate. Most of all, however, you would definitely be saving interest accumulation by putting all the loans into one.
Defaulting on repaying your student loans is not a good option. When you do not pay student loans, your credit rating will be affected adversely. You may not be able to borrow money for a new car, obtain a credit card, or purchase a home. You may also receive a large surprise bill in the mail, with a not so subtle request to pay it all back, immediately. Lenders may also be able to garnish your wages and withhold any federal and state tax refunds. If you had planned to go to graduate school anytime in the future, you would not be able to receive any additional state or federally funded grants, scholarships, or loans for that expense. Using credit wisely, even school loans, is always to your best interest.