March 31, 2017
For many students, financing their education involves borrowing money through federal student loans. Since students aren't required to begin repayment on these federal loans until after graduation, or when they drop to a less than half-time enrollment status, and their six-month grace period has been exhausted, it may be easy to put off payments until they are absolutely necessary. However, smaller monthly payments made while in school can mean the difference between manageable and discouraging required monthly payments in the repayment cycle.
The two most commonly borrowed federal student loans are Direct Subsidized Loans and Direct Unsubsidized Loans. Direct Subsidized Loans are need-based loans offered to undergraduate students. With this type of loan, the U.S. Department of Education pays the interest while the student is attending at least halftime, during the grace period (the first six months after a student graduates or drops below a half-time enrollment status) and when loans are in a deferred status.
Direct Unsubsidized Loans are non-need-based loans and are offered to both undergraduate and graduate students. Unlike Direct Subsidized Loans, the student is responsible for all of the interest accrued on the Direct Unsubsidized Loan during school and beyond. This means, if interest payments are not made while enrolled, the interest will capitalize-adding to the total principal loan balance to be repaid. To avoid capitalized interest, loan servicers can determine the monthly amount of interest accruing, and students can incorporate this expense to their monthly budget to better prepare for their future repayment obligation. To learn more about the impact of interest, and identify the interest rates associated with each loan type, visit studentaid.ed.gov.
To make direct payments on your loans while in school, contact your loan servicer. While each servicer is different, all will offer the option of making quick and easy payments online. To obtain contact information about your particular loan servicer, log into the National Student Loan Database with your FSA ID username and password.
In addition to making in-school payments, understanding what lies ahead on the road of repayment will make the responsibility of mandatory payments more manageable. While contacting your loan servicer directly will offer personalized repayment options and strategies, there are a number of self-service tools to organize and optimize your student loan repayment. The Repayment Estimator on studentaid.ed.gov allows students to log into their Federal Student Aid account and pull their current loan balance in directly from the National Student Loan Data System. Then, students are prompted to enter other information including their tax filing status, family size and income to best estimate what repayment will actually entail.
Earning a degree requires hard work, dedication and time. Making small interest payments while in school, and investing the time to understanding repayment options and scenarios, will help to ensure that the excitement of earning your degree will not immediately be followed by financial hardship or frustration. Always remember: There is no penalty, only incredible benefit, to making payments beyond just accrued interest while enrolled.
Jillienne Marinelli is a communications analyst in Student Financial Services at Southern New Hampshire University.
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