Understanding the Ins and Outs of your Student Loan

When it comes time to repaying your student loans, you may have a lot of questions about when and how to pay them. It is important to understand what your payments are paying off and what might happen if you are unable to pay them. Here are some tips to help get you started.

When do Payments Start?

Most student loan payments don’t begin until after you leave college and most loans offer a grace period of up to six months before payments begin. This is a time to allow you to get financially settled so you don’t have the burden of the loan until you are hopefully receiving a salary. Keep in mind that during this grace period, interest is still accruing.

There are a few circumstances that can change your grace period like active-duty military and returning to school before your grace period is up.

Making Payments

If the company that loaned you the money allows you to set up an automatic monthly draft, you most definitely want to take advantage of that. Sometimes these loan companies will take a small percentage off your loan for automatic deduction. Also, if the payment comes out automatically you don’t risk forgetting to make a payment.

You might want to consider paying more than your monthly payment to help pay down your loan faster and reduce your interest. There should not be any penalties for paying off your loan sooner.

If you miss a payment, you will want to try to catch up the next month. Missing several student loan payments will cause your loan to go into default. If your loan is defaulted that is reported to credit bureaus and this will affect your credit rating and your borrowing power in the future. There can even be extreme measures through garnishment of your wages and withholding of tax refunds if you don’t pay your student loan.

There are many people affected by student loan payments. It’s a good idea to make a plan and try to pay them as quickly as you can. You may also want to think about the amount of money you borrow in the first place and see if you can make payments on rent and housing expenses through savings from summer employment or employment while you are going to school. The smaller your loan amount, the quicker you will be free from it. Contact Carolina Money Minders for more help with your student loan today!