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How to Devise a Student Loan Repayment Plan

Student loan repayment is an issue that many students have anxiety about. Attending college is a daunting endeavor, with time commitments, studying, exams and expenses. While most students may not think about loan repayment while in school, that is the best time to confront putting together a plan. This is because the loan information is fresh in your mind and you can have a better grasp on what is expected down the road. Here is how you can devise a student loan repayment plan:

Step 1: Understand Your Loan

The lending business can be complicated. The one advantage that loans for education seem to have is that they are offered at lower interest rates than other consumer based loans. Find information about federal loans and types at the U.S. Department of Education's National Student Loan Data SystemSM (NSLDSSM). If your loan is through a private entity, contact the financial institution and get information from your loan representative. Find out about the total amount of the loan, principal and interest, and payment amounts.

Step 2: Understand the Grace Period

After you graduate or leave school for any reason below half-time enrollment, there is usually a period of time for most lenders before it is expected that you begin the repayment process. The grace period is set at around six months for most Federal loans, like the Stafford or Family Education (FFELSM), while Federal Perkins loans provide a nine month leeway. Federal loans made to parents start payments immediately.

Step 3: Design the Repayment Plan

Students have a number of choices and several repayment plans at their disposal. Most are designed with meeting the various needs of different borrowers. The amount of the payment and length of repayment time will vary and be dependant upon which repayment plan is chosen.

Step 4: Use a Repayment Plan Calculator

Use a repayment program calculator to figure the estimated repayment amount. Contact your loan servicer to answer specific questions for repayment of FFEL, Perkins or Direct loans. Perkins loan servicers are located at the school which made the original loan. You can also find out at the NSLDS website. If the loan was obtained from a private source, contact the loan institution to learn about calculating payments.

Step 5: Make Electronic Payments

Consider setting up regular and automatic electronic payments. You may be able to reduce the interest rate if you do so. Regardless, setting up auto pay is the most effective strategy to ensure that you always pay on time. This will eliminate damaged credit report worries and help you to establish a higher credit rating in the process. Many people believe that student loans don't count on your credit report, but the actual fact is that they do.

Step 6: Resolve Payment Issues

Most people intend to pay their financial obligations on time. However, it is a good idea to have your loan servicer information handy in case it is needed. If you anticipate that you will have trouble making your payments for any reason, arrange to contact your loan servicer right away to avoid embarrassment or credit reporting issues. Loan servicers are trained to be able to address these issues and help you to determine what the best options are, including changing the repayment plan and requesting a deferment to allow for temporary cessation of payments. Forbearance is another option to make smaller payments temporarily or extend time periods.

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