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| It's Payback Time |
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You throw your cap into the air with the thrill of knowing that you have just
completed a great challenge: College. As the cap falls from the sky and smacks
you in the head, it hits you: You are $20,000 in debt! The nights of cramming
for midterms, freshman hazing and caffeine comas have cost you, and now its time
for payback. Where do you begin?
First you need to relax and take a deep
breath. The United States government does not expect a check from you for
$20,000. The first thing to understand about a federal student loan is that you
have some time before you have to start paying it back. It's called a "grace
period" and it is extended for six months. During these six months, it is
expected that you will find a job and secure some type of financial stability.
Your first payment is due within sixty days of the first day of your repayment
period.
The next thing that you need to understand is that you have
repayment options. The Federal Student Aid website offers four specific
repayment options. These include the Standard Repayment Plan, the Extended
Repayment Plan, Graduated Repayment Plan, and the Income Contingent Repayment
Plan.
The Standard Repayment plan requires a fixed amount each month,
which is often a higher amount as you have ten years to repay. The Extended
Payment Plan takes longer to pay off your loans, which means you will pay more
in interest, but your monthly payments will be smaller. The Graduated Repayment
Plan is an excellent option, offering lower payments at first which increase
over time as your income increases. Finally, there is the Income Contingent
Repayment Plan, which allows you to adjust monthly payment based on family size,
income and loan amount.
If you have difficulty paying back your student
loans, there are two ways to handle it: Deferment or forbearance. Each of them
results in a pause or reduction of payment respectively.
Successful
repayment of your student loans
requires a clear understanding of your options
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