Repayment of Student Loans

After you have received your degree, have left school, or if you have dropped to a part-time student (less than half time), you'll have some time before you begin repaying your student loan amount.

• If you have Federal (FFEL) or Direct Stafford Loans your repayment begins in six months.
• If you have Federal Perkins Loans your repayment begins in nine months.

You're loan provider should contact you with repayment information and the date your loan payment begins. It is extremely important that you make your first and every payment on time in accordance to your repayment schedule. If you don't, you'll soon be in default and that has some serious consequences. You must pay back your student loans - just like a car loan or a mortgage.

Paying Back Your Student Loans

Should you have a FFEL or a Direct Loan, you have options in repayment plans. Federal Perkins Loans however, don't have repayment plan options and you typically need to repay this loan within 10 years. Again, it is extremely important that you make your full payment on time in accordance to your repayment schedule. If you don't, you'll soon be in default and that has some serious consequences.

You're monthly installment depends on the amount of money you have borrowed for your education plus any interest that has accumulated since disbursement. Your loan provider should provide you with either a billing statement or a coupon book. But, you must make your payments on-time, even if you don't receive these.

Interest on Your Student Loan

Interest accumulated on your loan is a percentage of the original loan amount. This percentage is the interest rate and it is calculated and added each and every month there is principal due. That's why you need to find the best interest rate possible when shopping for a loan or loan consolidation. Everyone has to pay interest no matter what they borrow money for.

Some interest rates are fixed while other loans are variable. A fixed interest rate doesn't change providing your loan is in good standing. A variable interest rate adjusts based on the prime interest rate.

If you have an Unsubsidized Stafford Loans, your loan has accrued interest since the date of disbursement. As a student, you can pay the interest while you're in school. If you don't though, don't worry. The interest amount that you accrued while a student will be added to your principal loan amount automatically. If you have a subsidized Stafford loan, the interest is paid by the government while you're a student. You wont be responsible for any interest until after your grace period and you start paying back your loan.

Your Loan Amount May be More Than You Borrowed

Because Unsubsidized Stafford Loans accrue interest, this interest amount is capitalized (added to your principal) automatically. Also, there are fees charged for Direct and Stafford loans in the amount of 4 percent. This fee is deducted proportionally with every disbursement, so the amount you receive is actually less than the amount borrowed. You are responsible for paying the entire amount borrowed, not just the amount received.

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