For many considering graduate school, the high cost of tuition can be a major detractor to even beginning an application. Student loans, grants, scholarships and other financial resources, though, can be a viable options for those who need help funding a master’s degree. As you begin researching your options, it is important to learn what’s available and, if necessary, consider a plan for loan repayment after graduation. Here are a few tips when considering how you will pay back your loans when the time comes:
Know When To Pay
One of the most important things to consider is when you will be required to begin paying back your loans. There is often a grace period after graduation that will vary based on the type of loan and the lender you use; typically grace periods are six months. Make sure you know how long your grace period is. Guessing or assuming can result in fees and missing even one payment will increase your interest rate. If you are unsure of when you will be required to begin repayment, contact your lender.
Many graduates don’t know that lenders offer options for repayment schedules. Do your research and be sure you are on a repayment schedule that compliments your income, loan amount and the interest rate of your loan. Many lenders will work with you to choose a time in the month that closely coincides with when you will be receiving your paycheck.
Know What To Pay
It is imperative that you are aware of not only your repayment schedule, but also what your minimum payment will be. Be sure to consider the interest rate of your loan, which you should lock in before you sign your promissory note to accept the funds. Loan repayment plans are generally calculated to achieve repayment in 10 years, which could mean you have a high monthly payment waiting for you after graduation. Although 10 years is what most lenders expect, they offer plans to extend the length of your repayment to reduce your monthly due. You should contact your lender to investigate income-sensitive repayment plans that may decrease your monthly total as you pay back the loan over 20 or 30 years.
What if You Can’t Make Payments?
If you are concerned that you will not be able to pay your loans under the terms your lender expects, contact them as soon as you can. Don’t wait until your grace period is up; failure to make your first payment on time will immediately work against you, often in the form of fees or an increased interest rate. If you discuss your concerns in fast order, they will work with you to accommodate a new payment schedule that can reduce your monthly payments.
There are other options available if you feel you will not be able to begin paying back your loans upon graduation. Lenders offer limited loan repayment deferments that allow you to put off payments for a set amount of time without accruing interest. These should be used sparingly as you will only be able to defer once or twice over the lifetime of your repayment. Lenders also offer forbearance plans, which allow you to defer your payments while the loan continues to accrue interest. This will ultimately increase the amount of your loan as the interest compounds, but forbearance is better than missing a payment or defaulting on your loans.
Plan Out Your Payments
If you have taken out multiple loans, ask your lender about consolidation. Consolidating your loans under one lender will reduce your monthly payments and, ultimately, the length of your repayment schedule. Consolidation also reduces the risk of missing a payment, as you will only have one payment to one lender as opposed to multiple payments to various lenders. Your lenders or a trusted financial planner can help you assess if loan consolidation is for you. There are resrouces that can help you better understand loan consolidation.
What About Loan Forgiveness Programs?
There are many federal and state sponsored loan repayment programs for professionals working in certain fields, such as teaching, social work or public service. These programs have certain criteria and most borrowers are only eligible to participate after making a certain number of full, on-time payments. There are resources available online that explain the guidelines for these programs and can help you determine if you are eligible.
While loan repayment is a daunting prospect, most graduates find that the experience of attending graduate school outweighs the challenges of repaying the accrued debt. Be sure to understand your loans and your lender, and to consider how you will pay back what you have borrowed before you sign on to accept funds. If you have questions about student loans or repayment options, contact your school’s financial aid office for guidance.
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