Understanding Loans

Posted on Posted in Financial

Things Every Student Must Know About Student Loans

May is considered the most important month for students who are on the verge of graduating. Apart from your final exams, and the dream job you’ve been wanting all throughout your life, it is also important to think about your student loans. You’ll need to cover the costs of your student loans after you graduate as payments will begin to kick in. It is really difficult repaying multiple loans as compared to only one loan. It is really confusing thinking that you need to deal with different agencies, and sometimes you won’t even know the amount you owe and when you should need to pay. The good new is that repayments can be simplified with a small dose of organization, and all you need to do is to get the necessary information so you can write it down or just create a direct debit account so the payment will just be automatically taken out.

One way to help new graduates in reducing their loans is by taking advantage of Obama Student Loan Forgiveness or Federal Direct Loan Program. This program is offered for all types of federal student loans and does not apply to private loans. With this program, a borrower receives a lot of benefits, such as consolidation of multiple federal loans into one new loan, and the borrower is given repayment plan options that are more affordable and flexible. The different types of repayment plans include standard repayment, graduated repayment, income contingent, income based, and pay as you earn. For standard repayment, a fixed amount is paid by the borrower for the entire life of the loan, basing on the interest rate, term of the loan and borrowed amount. Graduated repayment allows a borrower to pay lower than standard repayment plan, but the amount increases gradually every two years. The borrower makes payment basing on his income in an income contingent plan, as well as basing from the interest rate, loan balance, and family size. Income based repayments are based on the borrowers’ family size and income, not considering the interest rate and loan balance. PAYE or Pay as You Earn repayment has the lowest monthly payment basing on the borrower’s income or ten percent of the discretionary income.

It is important finding out the grace period of your student loans. It is typically six months but it can reach up to nine months depending on the type of loan. It gives you more time to find money to pay your loan. There are many options available for you, so try to read more of them by visiting our website.