Student loan payments – The factors that are considered for the payment schedule!

Student Loan Payments

Student Loan Payments

For most of the students, their financial background forces them to opt for student loans to get educated. After successful graduation from the college, the student loan payment starts and this is not a comfortable time for many students. However, it is necessary to keep with the payments schedule to avoid hurting the credit score. There are many ways to make payments for the student loans availed. As per the financial situation, the students can choose the option that suits them better. But, before that, it is important to get familiar with the options available so that the choice is made easier.

Standard Payment and Extended Payment

The basic types of student loan payments are standard payments and extended payments.

In a standard payment, the loan amount is settled completely within a term of 10 years. Though the payments are higher in this mode, it is much preferred if the financial condition of the borrower is quite satisfactory. Choosing this option will lessen the amount paid towards the loans for people with bad credit. In an extended payment, the borrowers can extend the term of the loan as per his convenience. Though most of the plans are for a term of 10 years, the borrowers can extend the term to 25 years if the amount of loan exceeds $30,000. The monthly payments are lesser, but the borrowers end up paying more towards the interest.

If the amount to be paid monthly is calculated taking in to account the gross monthly income of the borrower, it is called income sensitive repayment in which the term of the loan is at the most 10 years. In income contingent repayment plan, the loan amount and the income of the borrower are considered while the student loan payment is calculated. If the income of the borrower increases, the payment is also increased. The maximum term of the loan is 25 years and the balance amount due is discharged if the borrower is not able to pay.

Graduated payments

The graduated payment is devised to help the borrowers who are about to begin their career and are expecting to earn more in due course. In the early stages of student unsecured personal loans payment schedule, the payments are lower and gradually they increase with the income of the borrowers. However, if you are able to spare more towards monthly payments, it is not advisable to go for lower payments. With lower monthly payments, the overall cost of the loan is increased. By trying to settle the loans as early as possible, you can reduce the cost of the loan.

If you feel that none of these options can suit your financial situation, and if you feel that more time is needed to begin your student loan payments, you can consider deferment of payments. With this option, you can put off the payments temporarily, say for one year. Most of the students’ loan program does not require them to start their payments until 6 months after their graduation. However, it is important to know that the deferred payments are sure to hurt the credit record which is highly important for securing loans in future apart from leasing the house or getting employed.