Student loans can seem daunting, but they don't have to take over your life! Understanding your student loans is the best way to conquer them. Here are some common student loan repayment questions and answers.
How do I keep track of my student loans?
Starting something brand new, like paying off loans, can be very overwhelming.
The first step to managing your loans is organizing and understanding each one you have. To begin, create a detailed list of all your loans, including the type of loan, interest rate, length of repayment, minimum monthly payment, and lender's or servicer's contact information. Our student loan worksheet can help you start building that list.
Types of Loans
There are two main types of student loans: federal and private. Like many students, you may have taken out both federal and private student loans with different terms.
Federal Student Loans
Federal student loans can be divided into more categories:
- Subsidized and Unsubsidized
- Perkins
- PLUS (for parents or grad students)
Visit the Federal Student Aid website to get details on your federal loans. You can use your FSA ID to access your information quickly.
Private Student Loans
Private loans are issued by lenders, banks and credit unions. For example, ISL Education Lending offers private student loan options to students and parents to help pay for college. The promissory notes or credit agreements you signed to take out the loans will include contact information for your lender or loan servicer. Can't find your paperwork? The financial aid office at your college or university can help you.
Interest Rates
Federal loans have fixed interest rates, while private loans can have either variable or fixed rates. A fixed rate will never change over the life of the loan. A variable interest rate will rise and fall with market conditions.
Why is knowing your interest rates important? First of all, if you have a private loan with a variable interest rate, your monthly payment could change according to market conditions so be aware of that. Secondly, if you're able to put extra money toward your student loans, you typically want to put that extra money to the loans with highest interest rates first.
It's also important to understand that interest rates on student loans are calculated differently than for most other types of credit. Interest on student loans accrues daily and is calculated using a simple interest method.
Length of Repayment and Payment Amount
All loans have a repayment term that is set when you apply for and sign for a loan. Federal loans typically have 10-year repayment terms that are flexible based on the total amount you borrow. Private loans have repayment terms set by the lender and that usually cannot be extended unless refinanced.
Your loan documents may detail the repayment term in years or months. For example, a repayment term may be detailed as a 10-year term or as 120 monthly payments. If you did not have to make payments or made interest-only payments during college, your repayment term does not include the time you were in college.
Your minimum monthly payment is the amount you have to pay each month to pay off the loan in the allotted repayment term. Making payments late or inconsistently may mean your payments will increase, due to daily accrued interest, over time so that the loan is paid off in time. Federal loans and most private loans can be paid off early with no penalty.
While repaying your student loans, you may need to contact your loan servicer or lender with questions or for assistance. Knowing their website address and phone number is important in these cases.
When are my first student loan payments due?
Most federal student loans have a grace period. This means your first student loan payment will be due approximately six months after graduation, dropping below half-time enrollment or leaving college. If you leave college, use your grace period, then go back to college later, you will not be eligible for a second grace period after college the second time.
Private student loan repayment is dependent on the type of loans you have. Check with your lender or loan servicer to see when your first payments are due.
Private Student Loan Payment Options
Many private student loan lenders offer traditional loans where repayment is deferred while you're enrolled in college, but more and more lenders are offering different in-school repayment options to help reduce costs. What kind of private student loan do you have?
