In our previous blog entry about student loan repayment, we discussed the initial decision to borrow, the types of loans available to SIPA students, and the resources to keep track of when your loan payments come due and to whom you will make payments. Now let’s look at how to determine monthly payments and some of the flexible repayment options that can make managing student loan debt easier.
There are a number of repayment options once you get to that stage (for many loans, you don’t enter into full repayment until after you have graduated or ceased your enrollment). Different repayment options include Standard Repayment, Extended Repayment, Graduated Repayment, Income Based Repayment and Income Contingent Repayment; the different options can provide you with flexibility, lower your monthly payments, or calculate monthly payments as a portion of your income. But study these plans carefully…lower monthly payments can also mean a higher cost over the life of the loan, and not every borrower qualifies for every plan. Other students choose to consolidate multiple loans into one payment and prefer that convenience. Click here and check out the links under the “Borrower Info” menu for more information on the Federal Direct Consolidation Loan program.
Remember that these repayment plans and the consolidation option only apply to federal student loans. If you borrow any private loans, they cannot be consolidated, and repayment options tend to be more limited, typically with less consumer protection (which is why the SIPA Financial Aid Office generally recommends that students investigate federal student loans first).
Any time you borrow, you’ll want to know what your monthly payments will be. There are a number of online loan repayment calculators, and we recommend that you visit one to learn more about how much your monthly payment would be based on how much you borrow. One calculator is available at https://studentloans.gov (click on the Repayment Plans and Calculators link); it offers a comparison in monthly and aggregate payment amounts, including how much interest a borrower will pay, under different repayment plans offered by the US Department of Education. Another good set of loan repayment calculators can be found at www.finaid.org (click on Calculators and then scroll down to Loans). There you will see a number of links for specific repayment plans available to many borrowers.
In a future post, we plan to discuss options for temporarily stopping payments after you have begun making them, and a new exciting initiative that could save many SIPA graduates a lot of money based on their career choices – the Public Service Loan Forgiveness Program.