Student Loan Repayment Programs

2007-07-24 08:31:47

( Financial )



Repaying Your Student Loan is a Responsibility

When you borrow funds to finance your own or your child's education, the lending institution gives you a set of terms and conditions. You will need to pay both the interest and principal within a certain period of time under a specific student loan repayment program.

After you have received the funds, you are usually given a grace period before you begin repaying your loan. You will receive notification from your lender to remind you as to when the repayment begins, as well as the amounts and due dates. It is your responsibility to comply with the schedule of repayments the same way you do with mortgage repayments. Your school, the lending agency, the government and the loan guarantor can take legal action against you for your failure to service your student loan.

Types of Student Loan Repayment Programs

For some types of student loans, you can choose your repayment options.
One option is to pay a uniform annual amount over a period of ten years. Another option is the graduated payment plan, where you pay lower amounts in the beginning, with increases every two years. For larger loan amounts of thirty thousand dollars or more, you can opt for the extended payment plan where the maximum payment period is twenty five years. Normally, you will pick the student loan repayment scheme which is best suited to your financial situation, and you can request for changes as needed.

Under other types of student loans, your school is your lender and will therefore dictate the student loan repayment program.

In Case of Financial Difficulties

Sometimes, financial circumstances change and you may suddenly find that you are unable to comply with your student loan repayment program. In such cases, check with your lender or the school as to what payment relief options you can take.

You may be given a deferment or suspension of your loan repayments for a brief period. Deferment is usually granted for economic hardship such as loss of job or other means of income. If your student loan is non-subsidized, you will still need to pay the interest during the deferment period.

If you don't qualify for deferment, you might be able to ask for forbearance. This is a postponement of your loan plus any accrued interest to a future period, without incurring any penalty or dent on your credit record.

Tips About Student Loan Repayment Programs

The repayment programs may seem quite lenient. However, your repayment program is only a privilege, so you should always exercise responsibility to make payments promptly.

And in case you do experience some financial difficulty which may affect your payments, don't hesitate to discuss the matter with your lender or school. And while your application for deferment or forbearance is under process, continue to comply with the repayment program.


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