Title: Options For Student Loan Repayment
Category: student loans
When it comes to repaying student loans, it is important to understand
every available option. Most student lenders try to make it easy for
recent graduates to handle the repayment of their student loans because
they understand what a trying time the period just after graduation can
be. The following article contains explanations on the most common
options for repayment plans.
Standard repayment refers to the traditional repayment plan which applies
to most federal student loans. This plan offers the option of a fixed
interest rate, although that means that the monthly amount will stay the
same until the loan is paid off completely.
Extended repayment plans give loan recipients the opportunity to extend
the repayment period for their loans. The repayment period can be
extended to as much as twenty five years. The advantage of this plan is
that borrowers receive a lower monthly payment.
In the income sensitive repayment plan, the monthly payment amount is
determined by the amount of money the loan recipient makes each month.
Borrowers applying for this repayment plan have to show proof of income
by submitting the appropriate information, and they have to do so each
year they wish to reap the benefits of this plan. One qualification is
that, at the very least, the loan's interest must be covered in the
The graduated repayment plan gives loan recipients the opportunity to
initially begin with a low monthly payment. Over the course of the
repayment term, the monthly payment amount increases by gradual degrees.
In general, the monthly amount gets higher every two years or so. Again,
the monthly payment must at least cover the loan's interest.
There are other ways to modify repayment plans. Many students choose to
postpone their payments for a set period of time. For starters, with most
loans, students are allowed a six month grace period following their
graduation withdrawal from an institution. The grace period also applies
if a student has to begin attended school on a part time basis for
whatever reason. In the case of subsidized student loans, the federal
government takes care of the interest during the grace period. For
unsubsidized loans, students either have to pay the interest payments
while they are enrolled in school or else they can defer the payments
with the understanding that the accrued amount will be applied to the
There are also several options for deferment. Deferment is a span of time
where students are not responsible for repaying their student loans. When
a subsidized student loan is deferred, again, the government covers the
cost of the interest. When a student defers an unsubsidized loan, the
interest will be accrued and later applied to the total loan amount.
Students can receive in-school deferments if they are attending school on
a part time basis at the very list. Proof of enrollment is necessary to
receive this kind of deferment. In circumstances of financial problems
and unemployment, deferment is also possible. This deferment can last for
a year at a time but it cannot occur more than three years over the
entire life of the loan. Forbearance is also a possibility. It follows
the same rules and requirements as deferments, for the most part.