Repaying student loans
I’m still four years away from having to repay my student loans, but I know I should start thinking about it now. Get Rich Slowly posted a great guide to repay student loans.
If you have federal loans, your options are much simpler. The interest rate is lower, so it’s usually best to just pay them as scheduled. Private loans are a whole different ball park and very confusing because terms usually vary from provider to provider, while government-backed loans are stuck with the federal terms given, no matter who your lender is.
One option is consolidation, which is not the best option unless you seriously can’t afford the monthly payments. Consolidation leads to a higher interest rate because you’re extending the life of the loan and there are more complications with private loans. Depending on your financial plan, consolidation can be a good or a bad option.
There are also options for loan forgiveness if you are going to be joining the Peace Corps or the military (or other programs that are listed on the FinAid website). I personally don’t qualify for any of this, so I hope I’ll get a high-paying job with my really expensive fancy degree so I can pay my loans off quickly.
Also, you can’t simply just declare bankruptcy anymore and be done with your loans. Certain federal loans will go away, but not private loans. The government decided on this a few years ago because too many students were coming out of college and declaring bankruptcy right off the bat. There are certain circumstances surrounding the issue, which are covered in more detail here.
The FinAid website also has a Loan Calculator that just made me feel very sad about the amount of interest I’m going to pay just on my freshman Stafford loan. Bring on the next three years worth of borrowed money.
This page was last modified on November 7, 2007 @ 9:41 pm
4 Responses
Always important to start thinking about your finances as early as possible, as you will be graduating sooner than you think. Believing you will get a high paying job is good for optimism, but I would hedge your bets and prepare incase you don’t get what you want. I didn’t do this, and although I have a good job, and earn a little more than my friends, I wish I’d thought more about my future financial situation.
I just graduated college in June, and my first loan payment is due in six days. I am not excited. Let me tell you from personal experience that taking out a student loan should be your very last option. I definitely suggest working part-time during college if your course load allows it–it gives you recent experience for your resume (which makes it easier to get a job after college) and it can help you avoid getting in to debt.
Also, if you are looking into consolidation (which can be a good choice for some people, if it allows you to lower your interest rates, for example) watch out for those 20 or 30 year repayment plans–they mean LOTS more interest.
Yeah, paying back student loans suck. I have some friends who owe over $100K after grad school.
Consolidation can certainly extend the payment period and the amount you pay back in interest…..if you only make the minimum payments. The advantage to consolidation is that it allows you to make smaller payments in the beginning when you are fresh out of school and not making a lot. But, if you can afford to, you can make larger payments without penalty and knock down the loan much quicker than the 20 or 30 years you signed up for.