The first thing to do when confronted with repayment of student loans is to not panic. Millions of people are facing debt today and you are not alone; however, a major problem with loan repayment is the lack of informed individuals on the process. There are several key things that students should be aware of in terms of loan repayment. These key items include fees, interest and postponement.
Fees are interest charges that occur at the time of the loan and are due to loan services. Loan services include origination and disbursement fees and are considered to be up-front costs. The origination fee is charged at the time of the loan is first made. This fee covers start up and paperwork costs for borrowing funds. A disbursement fee is subtracted whenever an individual receives another loan payment. While fees can be charged at the beginning of the loan process, individuals may also incur fees during the repayment period of the loan. Some of the most commonly incurred fees charged during the repayment period are in the form of defaulted fees or punishment fees. Defaulted fees are a result of individuals failing to pay back their loan. Punishment fees occur when students are late in a loan payment.
Interest rates are essentially the price that you pay for borrowing the money. Basically, the individual who borrows the money has to pay back a certain percentage extra to the person the money was borrowed from. There are two different kinds of interest rates: fixed and variable. A fixed interest rate means that the percentage you must pay back to the lender will always be the same percentage amount. All federal student loans have a fixed interest rate. Variable interest rates can change as often as per month. Variable interest rates are typically associated with private loans such as those from banks or credit unions.
When it comes to repaying your student loans, both private and federal loans allow students the option to postpone payment. Postponement often takes place in two different forms: deferment and grace periods. Deferment allows students to postpone payment while they are in school and is available for all kinds of loans. Interest rates will continue compile during the deferment period. Another kind of postponement is a grace period. Grace periods are typically nine to six month periods before students have to begin grace periods are available for both Federal Perkins Loan and Stafford loans but not for Parent and Grad PLUS loans.