Student Loans

Unbiased financial information provided by Financial Wisdom.

If you have a student loan, you are not alone. One recent study found that almost two thirds of graduating college seniors had student loans and the average loan amount was over $23,000. For those graduating from private schools and those getting advanced degrees, the numbers were even higher. The student loan environment is constantly changing and the rules can be confusing. In addition, the federal government is now playing a far more active role.

The result is that if you have student loans, you are going to have to do some investigation on your own to fully understand your particular situation. As you go through that process, there are a few things to keep in mind:

• What type of repayment plan will you have? Many loan programs allow you to defer starting the repayment process until you graduate and then have level payments for up to ten years to pay off the loan. Depending on the type of loan you have and your situation, you may be able to extend the term or have variable payments.
• What are the terms (repayment and interest rate) of your loan? As you review your loan, be sure to compare the student loan rate with any other borrowing you may have. For example, it may sound nice to pay off your student loan just to get it behind you, but if that means that your credit card balance would grow, it may not make sense.
• Would consolidating your loans or refinancing them make sense? Again, you need to review all of the terms of any existing loan with the terms of a potential consolidated loan. Be sure to consider rates, terms and any costs of consolidating or refinancing. There is a calculator in the Personal Life Financial Skills Resource Center that may be helpful.
• What if you are having trouble making your required payments? Living up to your repayment responsibilities is serious.
• Missing payments may trigger penalties and ultimately that may be reflected on your credit record. If this is an issue, contact your lender immediately. You may be able to work out an agreement to extend the repayment period or change the terms to ease the problem. Your lender does not want to see the loan go into default and neither do you.