Repaying Student Loans

About Repaying Student Loans
Student Loans are a form of financial aid designed to assist students in covering the costs associated with attending college when personal resources, scholarships, and grants are not enough to cover the total cost. As a part of a financial aid package, student loans differ from the other components of financial aid such as grants and scholarships, as, rather obviously, student loans have to be repaid. However, if you do your research, you can find the student loan that is best for you and minimize the amount you will have in repaying student loans.

Types of Student Loans
There are essentially two kinds of student loans available: private student loans and federal student loans. Federal Student can be either subsidized or unsubsidized, depending upon financial need. To determine eligibility for federal student loans, students need to submit a FAFSA (Free Application for Federal Student Aid) so that their financial need can be determined. The calculated need figure will impact the amount and type of federal student loans awarded. If federal student loans are not enough to cover the cost of college, then students can turn to private student loans as a final source of funding. Students can apply for private student loans through private lenders, such as banks or credit unions, as well as through dedicated lending institutions, such as Sallie Mae.

Repaying Student Loans
Repaying student loans differ with the type of loan borrowed: federal versus private, subsidized versus unsubsidized, fixed interest versus variable interest rate, etc. The following are some basic guidelines/generalizations that may apply to repaying student loans.

• The interest rate on student loans could be at least 2% lower than the interest rate on conventional loans.
• All federal loans have a grace period after a student graduates until the repayment period begins. Many private loans will offer a grace period as well, but students should check the terms of the loan.
• Students have multiple options available to lengthen the period of the repayment. While that may decrease the amount of monthly repayment, it increases the total amount of interest to be paid on the principal.
• If students have multiple student loans, then they can consolidate those loans into one loan; however, federal loans and private loans cannot be consolidated together.
• If students come under financial hardship they may have deferment options available to them from their lender. Students should check with their lender for those options.
• For subsidized federal student loans, interest on the loan is paid by the U.S. government during the time students are in school, so they are only responsible for the interest accrued during their repayment period.
• A promissory note is signed as an agreement between the borrower and the lender, which then binds the two parties in the terms and conditions of the repayment process as agreed upon by both.