How much do you know about your student loan interest rate? Chances are you don’t know as much as you should. Often we get so caught up in our studies that we don’t really think about the details of our academic debt. We simply sign the forms and go to class. Unfortunately, you get hit with the reality of your loans when you graduate and must start repaying them.
Deferred Student Loans
It’s surprising how many people do not realize that the student loan interest rate is not halted while the loan is on deferment. Just because you are not paying on the loan doesn’t mean that interest isn’t racking up. You can avoid ugly surprises in the future by being aware of your interest rate and paying the interest throughout your academic career.
You should definitely pay your interest monthly if you are finished with your degree but have received an economic deferment. The economic deferment is given when you truly do not have the ability to pay your loans after leaving school. Once you have qualified, however, your loans continue to accrue interest, and you are much better off paying that interest as you go if at all possible.
Variable versus Fixed Interest Rates
Do you know if your student loan interest rate is fixed or adjustable? This is an important factor of your loan agreement. Adjustable rates have a bad reputation, but can actually be better for you financially than a fixed rate. If you have an adjustable rate, be sure that it adjusts up or down, based on the average interest rates set by the government and financial institutions. If it only goes up, you’re better off with a fixed rate.
If, however, your student loan interest rate is fixed and interest rates drop, you could find yourself paying a lot more interest than is otherwise necessary. If you have inadvertently fallen into this common trap, you should consider refinancing your loans at a lower interest rate. At that time you should opt for the adjustable rate, with the provision that it adjusts accordingly as mentioned above.
Finance Charges versus Interest Rates
Finance charges are not the same as interest. Your loan agreement may contain provisions for the lending institution to charge a finance charge monthly or annually based on the amount owed. This is charged in addition to, not instead of, interest.
If you are being charged finance charges on more than one loan, the student loan interest rate may not make much of a difference in the amount of academic debt you are accumulating. You should consider consolidating your loans so that only one finance charge is applied. This will save you a lot of money in the long run.
By: Joe Eitel
Posts Tagged ‘Provision’
Little Known Student Loan Interest Rate Facts
May 29th, 2010Should You Consolidate Your Student Loans While You’re Still in School?
January 24th, 2010
There are four really significant features of student loan consolidation someone should learn about. The most known kind of student loan repayment choice is the student loan consolidation. Student loan consolidation is favored to students with debt due to the benefit of each – short term and long term by combining a student’s college loans into one monthly payment.
Do you wonder if you should consolidate your student loans? It’s a good choice to do so. Here’s how to do it.
1.By consolidating your student loans, the payments become more manageable after you graduate.Your monthly payments might be reduced by as much as one half, since rates are usually lower and the repayment time is longer.
2. The newest type of thing in student loan consolidation plans is called “in school consolidation.” This allows you to consolidate your existing college loans while you’re still in school in order to lock in low rates for at least a portion of your student loan .
3. You can save hundreds of dollars of interest dollars by consolidating your student debt. It’s better to consolidate as soon as possible in order to postpone larger debt.To be successful in your loan application you need to figure out your income and debt and how it relates to your intended amount you want to borrow.
4. Don’t over think your decision to consolidate your student debt, just get to it..The sooner you consolidate, the sooner you will benefit.
A lot of students don’t want to consolidate their college loans while they are still in school, because they believe it might lower their standard of living. But remember, if you consolidate a college loan during school it doesn’t require that you must immediately begin repayment. There is usually a deferment provision you can put to use and so you can begin to repay your loan after you have graduated.
By: Robin Silfies