Graduation day is over; title in hand, the chilling reality of his student loan looms. She doesn’t start repaying her loan until 6 months after graduation. When the loan payment begins, you must pay at least $50 per month until the entire student loan and interest is paid off.
It makes sense to pay off the loan amount early, so you lower the interest, which will continue to rise on your loan. Financial planners recommend that you pay the minimum balance on your student loan and try to save as much as you can for retirement. In any given month, you can choose to pay more than your monthly requirement without penalty.
There are mainly four payment options that you can choose from. If you get a good job after college and can afford high monthly payments, follow the standard payment schedule. Under this option, you can pay off your debt within 10 years at the best interest rate. It is the fastest way to pay off your loans. However, it requires high monthly payments.
Staggered pay is an option if you expect to earn a modest but steadily increasing salary. Payment requirements will start out soft and gradually increase every two years for the next 10 to 30 years.
If you have a commission-based or seasonal business, your income will vary accordingly. In this case, your monthly payment bill will be proportional to the amount you are currently earning. You get a lien to get up to 15 years to pay off your entire student loan.
With a long-term payment option, you’ll be able to pay as little as possible each month for 10 to 30 years. However, that means that in 30 years you may have paid double your original loan amount. You have the flexibility to choose to switch from one payment option to another, depending on your financial status.
However, if you find that you just can’t keep making monthly payments, no matter how small, you can choose to defer your loans. This means that during a period of time that is negotiated between you and your lender, you will not pay any amount on the loan. However, interest will continue to accrue, unless your loan is subsidized.
Not everyone is qualified for loan deferment unless you can prove you’re stuck in financial hardship. Unlike deferment, forbearance gives you a shorter three-month break from your loan payment. However, you cannot grant him a leniency unless you believe his request is reasonable.
Student loan consolidation is another well-trodden path chosen by graduates each year. It allows you to bundle your separate student loans into one large loan. This is a taste when you cannot afford to shell out a large sum each month.
Debt consolidation will bundle your student loans into one, single loan amount that will be much less than paying off multiple loans. Some also choose consolidation because it’s easier to keep track of the bill.