Types of Repayment Options for Student Loans

The repayment options one has for student loans will first depend on whether the loan is from the government or from private lenders. Government student loans basically have a grace period of six months after leaving or graduating from school before repayment is expected. Interest is not charged while still studying.

It starts to accrue right after leaving school, whether as a graduate or not. Private lenders, on the other hand, most often require payment a month after the loan is received. Likewise, interest is also charged even while the student is still in school.

Repaying your loan

With government loans, students can also start paying even while still in school or during the grace period if they opt to. Doing so is even encouraged as it greatly diminishes the accumulating interest, which will lower the entire cost of the loan.

Most private lenders, on the other hand, will impose a penalty if you pay in advance or before your due date. There is also a fee or penalty if you make lump sum payment higher than the amortization due for that month.

If you happen to have difficulty in meeting your student loan payments, the Government has a Repayment Assistance Plan. Enrolling for this plan will either suspend payments or significantly decrease the payment amount you are required to pay each month.

The level of assistance awarded to you will depend on your income and level of debt. If you are suffering from a severe permanent disability that prevents you from working, you may apply for loan forgiveness.

Aside from being more expensive, it is harder to ask for repayment assistance for your private loans. You may request for temporary relief from your loan or have your payment amounts lowered, but the chances of that getting approved is not as straightforward compared to the Government’s system.

One option you can take if you have more than one non-government student loans is to go for loan consolidation. Under this scheme, the loan consolidation company buys all your loans. The company in effect becomes your new lender.

You can save money under this scheme, as the consolidated interest will be lower. The repayment period will also be longer, which means lower payments every month.

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