4 Important Things to Know About Your Student Loans

Whether you’re just starting to apply to college or you’ve got a few years under your belt, you’ll want to make sure that you thoroughly understand your student loans. Many young students don’t put much thought into their loans until after they graduate, and the terms of their repayment surprise them. Here are four important things to know about your student loans.

Understand the Rates and Terms and Type of Loan

There are many different types of loans, so make sure you understand exactly what kind you’re agreeing to when you sign. Before choosing a loan, be sure to read all of the fine print, or you could find yourself with some very unpleasant surprises down the road.

Federal loans come with fixed interest rates. Private loans determine interest rates based on credit and income and some are fixed and others are variable, meaning the rate can change. Terms vary depending on the loan type, as well. Some loans allow for slower repayment or refinancing, while others don’t.

Federal loans are either subsidized or unsubsidized. The government pays interest on subsidized loans while the student is still in school, but students are fully responsible for all interest accrued on unsubsidized loans. First, you’ll need to start with a FAFSA application to see what you qualify for. Once you’ve figured out what financial aid you can get from the government or your school, you’ll likely need to look into a private loan to make up the difference.

Repayment Options

Be sure to know what your repayment options are for all of your student loans. Some loans offer income-based repayment plans. You can also defer your loans for a period of time if you’re having trouble making payments. Keep in mind that the longer you take to pay off your loans, the more interest you’ll pay.

Certain loans offer an auto-debit option. This is a great idea if you can afford your monthly payments because it’ll make sure you aren’t late or forget to pay. You might even get an interest-rate reduction for choosing this option.

Relief Options

Federal loans and private loans both offer loan relief options. You’ll need to contact the specific provider to find out what your options are. Some banks will modify your loan or lower your interest rate if you’re struggling to keep up with payments. You might even be able to get your repayment put on hold for some time until you’re back on your feet. Certain career choices offer federal loan relief, so be aware of these options, as well. However, it’s very important that you are aware that unlike other types of debt, you cannot get rid of your student loan debt through bankruptcy court so this debt will be with you for life or until you pay it off.

Avoid Debt-Relief Scams

Be careful not to fall for a student loan debt relief scam. Debt repayment should be handled between you and your lender directly. Basically, if a loan relief company offers you help with repayment but asks for a fee upfront, run away. You’ll likely begin fielding spam phone calls from these fake companies the moment you graduate, so be aware.

Don’t get caught off guard. Student loans are not free money, and you will need to pay them back. Get a handle on your loans and all of the various options available to you before you start paying them back. You’ll save yourself stress and money in the long run.

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