College Student Loan Repayment

Student loans are one of the only forms of debt that cannot be discharged in bankruptcy.

They are with you for life – or at least it might seem that way while you are in the midst of repaying college loan debt.

The National Center for Education Statistics has found that half of all college grads have at least $10,000 in student loans when they graduate. If you are one of these statistics, then here are some facts that you need to know about paying back your student loans.

Grace Period

As long as you are in school at least half-time, your loans are in deferment, which means you do not need to make monthly payments. If you have a Perkins or subsidized Stafford Loan, your interest also does not accrue while you are in school.

Once you graduate, leave school, or drop below half-time status, you have a six to nine-month grace period until you must begin repayment. For a Stafford loan, you have a six-month grace period; the grace period for a Perkins loan is nine months. A PLUS Parent Loan generally requires you (or your parents, as the case may be) to start paying back on the loan within 60 days of dispersal.

College Loan Repayment Plans

The standard repayment term for a Stafford, Perkins or PLUS Parent Loan is 10 years. You may defer your loan under exceptional circumstances, such as returning to school, loss of employment or other financial hardship.

If the monthly payments on a 10-year, fixed plan are too steep for you, you can also work with your lender to set up an alternate payment plan, such as:

• Graduated Repayment Plan, which features lower monthly payments at the beginning of the loan term and increases your payments as the term progresses.
• Income-Sensitive Repayment Plan, which adjusts your monthly payments in accordance with your yearly income.
• Extended Repayment Plan, which extends the term of the loan to up to 25 years.

College Loan Forgiveness for Public Service Employees

Congress has recently passed a bill on loan forgiveness for public service employees. Full-time employees in a public service job may have the balance of their loan cancelled once they have made 120 consecutive monthly payments.

Student Loan Consolidation

If you have multiple loans, you signed up for your loan at a relatively high interest rate, or you would like to extend the term of your loan, consolidating your student loans might be a good option for you. A quick way to find out if consolidation will make your monthly payments more manageable is to check with an online loan consolidation calculator. You enter in your type of loan, remaining balance and current rate and learn how consolidation will impact your monthly payments – and the total of your loan including interest.

Student Loan Default

If you fail to make your monthly loan payments, you will be in default. Default comes with serious consequences, including:

• Your wages can be garnished
• You can be being sued
• Your credit rating will be destroyed, making it difficult to be approved for a car loan, mortgage or even rental

While student loans may seem like free money while you’re in college, they are not. You must pay back your loans regularly and in accordance with the terms of your note. If you fail to do so, you will open yourself up to serious legal and financial consequences. Your loans – just like your education – are your responsibility: Both should be taken very seriously!