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Make your payments affordable. Don’t accept the first loan and terms that come along. You have the right to negotiate. Many financial insti- tutions will offer benefit programs to entice students to borrow from them. These benefits can include lower interest rates and repayment options. A common benefit is a reduced interest rate for payments that are automatically deducted from your bank account every month, or for a certain number of payments that are paid on time. Find the program that works best for you.
Some repayment options include:
• Standard Option: Monthly loan payments have a fixed amount and can be paid back in up to 30 years, depending on how much you borrow. Ten years is a more common repayment term. Paying each payment on time for the life of the loan will mean you pay the least amount of interest of all your options.
• Graduated Payment Option: This plan allows you to have lower monthly payments for the first few years and then the payments increase gradually over the life of the loan.
• Income Sensitive Option: While this option may sound appealing, it can be a little risky if you’re not careful. With
this option, the monthly payment amount is adjusted annually based on your income, but if you’re not careful, your monthly payment may not be enough to cover the interest accruing on your loan and you are never able to pay off the principle.
• Consolidating Your Loans: Usually you must apply for a new school loan each year you are in college. This means that when you are through, you may have three or more student loans.
If so, you may want to consider consolidating your loans. Loan consolidation, in very simple terms, means you combine all your loans into one so you only have one monthly payment with a fixed interest rate. Because the combined total is higher, it also usually means you will have a longer repayment term. To really benefit from a consolidation option, your loans should total at least $10,000, and all the loans must be under your social security number.
Student Loans and the Cost of a Good Education