Best Way to Repay your Student Loans

Best Way to Repay your Student Loans

student-Loan-DebtA lot of graduates stress out from the debt they have accumulated from getting their associate’s degree from a technical school, bachelor’s degree from a university or a MBA from business school. When confronted with student loan repayments, they do not understand the repayment process. Student loans should be treated like any other loans since they are just like mortgage loan or auto loans, and so there should be a plan to make repayments if you want a solid financial future. To do this, you need to understand some of the loan repayment terms like interest, fees and postponement.

Besides the interest charge, the loan account also attracts other service fee charges, and these fees can be charged upfront or before the loan term expires. Origination fee is an upfront service fee that covers paper work and loan application process. While disbursement fees is another fee charged upfront juts after the loan amount is approved for draw-down. On the other hand, default and punishment fees are charged on account before the expiry date. Default fee applies when you do not remit your scheduled loan repayments on time, and  just like the default fee, a punishment fee is charged on student loan accounts for late repayment.

Interest rate can be considered as the price for borrowing money. This is the extra amount the borrower has to pay for borrowing money, and this amount is usually calculated as a percentage of the principle amount borrowed. Interest rate can either be fixed or variable. Fixed interest rate remains unchanged until the loan term expires, while variable rate can change monthly, quarterly, every half-year or yearly depending on the loan terms and conditions. All federal student loans attract a fixed interest rate; however, private loans from organisations like banks and credit unions can attract both fixed and variable interest rates.

All student loans whether it is a private or federal loan has an option to postpone payments. So students can apply for postponement under two different conditions: deferment or grace period terms. Deferment allows students to reschedule loan repayments to a later date, but the loan continues to attract interest until the expiry of the deferment period. Grace period, the other type of loan postponement allows students a period between six to nine months before they can start making loan repayments. However, grace period is only allowed for students when taken as a Federal Perkins or Stafford loans and not Parent or Grand PLUS loan.

Making a loan application is among the easiest things to do in life, but if the borrower does not take time to understand the entire process things can prove difficult in the end, therefore, understanding the process is an important step because it puts you in control when faced with loan repayment issues. Also, if you are unable to manage your loan at the early stages, it can become a very costly affair which can put you in financial turmoil. To avoid such a situation, students and other borrowers should explore all support avenues before making any bold steps as this helps to understand the available loan repayments options that can make debt more manageable and less intimidating.