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| Paying Back Your Student Loans |
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As you begin planning your monthly budget, remember to include your student loan payments as part of your monthly bills. Making these regular monthly payments on time can greatly assist in establishing a solid credit history. Future lenders will look favorably upon any past credit that has been successfully managed.
When you are just starting out, thinking about finding a job, paying back your student loans and renting an apartment all at once can simultaneously seem exciting and overwhelming. It might be encouraging to note that most Federal Student Loans have a grace period (usually six months) that allows you to settle down and find a job before your payments actually begin. Read through your loan documents or talk to your lenders to find out when you will be expected to begin making payments. If you do have a grace period, you will want to be sure you plan properly so that you will be ready to begin payments when the time comes.
If the time arises for you to begin paying back your student loan and the monthly payments are too high to afford, talk to the lender right away. Most student loans have established a variety of repayment options beyond the standard repayment plan. Below are some student loan repayment options that you might wish to discuss with your lender, all of which will reduce your monthly payment amount:
- Income Sensitive Repayment: Payments are based on the size of your salary and increase when your salary increases. This method of repayment takes longer to pay off than a standard repayment plan (around fifteen years) and costs you more in interest over the life of the loan. The benefit is that your payment amount will always be based on what you can afford.
- Graduated Repayment: Lower monthly payments increase gradually over time. Since this plan is not based on your income, you could be in trouble if your income doesn’t increase at the same rate as your loan. The benefit is that you still pay off the loan in the standard ten years, but you do end up paying more in interest compared to the standard repayment plan.
- Loan Consolidation: This option lets you combine all of your student loans into one lower monthly payment. Again, the loan term will last longer than a standard repayment plan and will cost you more in interest, but the benefit is that your monthly payments are lower.
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