Comparing Student Loan Repayment Options

Despite recent record highs of college student loan debt, just 21% of Americans have ever borrowed money to fund their college education. And although most students use federal student loans for their educational endeavors, some have considered using a high interest, private student loans for their educational needs. However, while working on a federal loan, or any college debt loan, it is important to remember that there are many options available to graduates looking for a low interest graduate loan. Private student loans, along with federal work-study and grants, can cover the difference between what you actually need and how much you're able to afford to pay for your college costs.

It is critical that you do some homework when choosing a student loan. To begin with, ask yourself if you are financially prepared for college. If you have not completed a Bachelor's degree or have an Associate's degree already, consider whether or not you will be able to repay your student loan in a lump sum or through monthly payments. If you think you will not be able to make your monthly payment, it may be better to wait until you have finished your undergraduate studies and are a little further in debt. A Master's degree holder who is just starting out at their new career can opt for a longer repayment term. This is especially true if they plan to go back to school for a further degree.

You can also change your student loan terms to better suit your needs. Many lenders offer student loan refinance options. If you are currently in the process of refinancing, be sure to ask the lender what your options are. In some cases, you can have your interest rates reduced significantly to allow you to enjoy more affordable monthly payments.

For many students, they will qualify for a federal loan consolidation program. Federal consolidation programs will allow you to combine all of your private student loans into one single guaranteed loan with a fixed, low interest rate. There are a variety of lenders who are approved for federal funding. You should do some research to find the most attractive rate and terms before you apply. Keep in mind that you will need to supply the lender with all of your financial information, including income, credit history, and all of your student loans' balances and payments. You will also have to provide documentation on your income, your employment history, and any assets that are owned by your mother or father.

The median unsubsidized federal student loans rate is 6.5 percent. Students who owe more than this amount in debt are considered low-risk borrowers. If they borrow an unsubsidized federal loan, they will pay interest on this amount without taking out a separate federal loan. Typically, federal students who have an unsubsidized loan do not qualify for a subsidized rate. Subsidized rates will require borrowers to take out a subsidized loan from the federal government and then pay the interest on this loan while they are enrolled in school. Many students do not qualify because their income does not meet the requirements.

The repayment terms vary among different types of loan. Some types of subsidized rate loans require borrowers to make minimum payments. However, subsidized rate loans will also allow borrowers to choose the amount of the interest each month for the duration of the loan. This type of repayment schedule is good for students who want to keep their costs down during school. Some subsidized rate loans will also allow borrowers to make early payments. These payments will be applied to the principal of the loan and will be repaid once the borrower graduates from school.

Many students have difficulty managing their finances. They may have a number of loans that all have varying interest rates. As a result, many students find that they are paying large amounts of interest every month. For this reason, many students consider student loans a great way to get an education without having to worry about repayment issues. A lot of lenders will allow students to put off payments until they have finished school.

A lot of private student loans offer an early repayment option. However, if the loan term runs out before the student graduates, he or she will have to begin paying the full amount of the loan. If an early repayment plan is offered, the borrower may be required to repay some or all of the loan. If a borrower doesn't have an early repayment plan, he or she may end up paying a substantially higher interest rate than someone with an early repayment option.