Your Cheat Sheet: A Quick Guide to Student Loans for College


LOAN REPAYMENT OPTIONS

You typically have four repayment-plan options for federal student loans. Private loans have their own guidelines for repayment, and repayment plans can vary by lender.

The four main repayment plans for federal educational loans are as follows:

  • Standard Repayment — you agree to pay a fixed amount for the loan up to 10 years, depending on the amount of the loan. The minimum payment requirement is $50 per month.
  • Extended Repayment — the loan term is extended to 12 to 30 years to reduce the monthly payment. This gives you more monthly cash flow, but you wind up paying more in interest charges over the life of the loan.
  • Graduated Repayment — this repayment schedule begins with lower payments so that you can afford payments as you start your career, and then increases gradually every two years. The loan term can range from 12 to 30 years, and the monthly payment must be at least $25.
  • Income-Contingent Repayment — your payments are contingent on your income level and will be adjusted annually as your income or family size changes. The maximum repayment period is 25 years. After 25 years, any remaining student loan balance is discharged, or forgiven.

No matter what student loans you decide to take out in order to pay for college, it’s important to realize that repaying college debt is serious business.

If you default on a student loan, you risk damage to your credit rating, being barred from getting future educational loans, and potential wage garnishment.

Read these tips for more advice on how to fix a defaulted student loan and check out these calculators from FinAid.org to find out how much a college loan will cost you.

Lynnette Khalfani-Cox is a weekly money and finance columnist for BlackEnterprise.com and founder of the free financial advice blog, AskTheMoneyCoach.com. Follow her on Twitter @themoneycoach and see her column every Tuesday on BlackEnterprise.com.


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