8 Student Loan Questions to Ask Before You Graduate

By Elise Nelson on April 23, 2018

From the moment you apply for financial aid in your freshman year to the day after college graduation, you should always keep student loans in mind. Learn about them as soon as possible and start saving money so that you don’t feel lost when it’s time to pay up.

There’s a lot to learn, but luckily, there are also plenty of answers. Here are 8 student loan questions to ask before you graduate.

1. What type of student loan did I borrow?

The procedure for paying a student loan primarily depends on which type of loan you borrowed. Put simply, there are two different loan types—federal and private.

Federal: These loans are provided by the federal government. Federal loans often include more benefits than private loans and cost less, so borrowers typically request these loans first. To be a bit more specific, there are a few different types of federal loans …

  • Direct subsidized: These loans have better terms for families with more financial need, but they are only available to undergraduate students. Your school will determine the amount you borrow. However, this amount may not cover your financial need entirely.
  • Direct unsubsidized: These loans are available to undergraduate and graduate students. You do not have to demonstrate financial need. Again, your school determines the borrowed amount, based on the cost of attendance and other financial aid you receive.
  • Direct PLUS Loans: The parents of undergraduate students apply for these loans, but they are also available for professionals/graduate students. The U.S. Department of Education lends the money.

Private: Your private student loan can come from a bank, a credit union, a state agency, or a school. The terms will vary depending on the lender, so it’s important to read every detail when it’s time to pay your debt. Some options similar to the federal loan types may be available for your private loan if the lender offers them.

Your lender or student loan servicer should have provided you with paperwork when you applied for your federal or private loan. If you aren’t sure what your student loan qualifies as you can find all the information in the papers. Alternatively, you may check the National Student Loan Data System for federal loans.

2. Who will I submit payments to?

You will either pay the lender directly or submit payments through a loan servicer. Again, you can find information regarding whom you owe federal loans in the National Student Loan Data System. You can also check with your school’s financial aid office—they will have the location where you’ll need to send payments on file.

If you do have a federal student loan, you’ll be in contact with a loan servicer about payments—this is a company that collects your payments and answers questions on behalf of a lender. Some examples of loan servicers are Nelnet, FedLoan Servicing, and Corner Stone. Contact information for these companies and others can be found here.

If your private loan came from bank or credit union, such as Citizen Bank or PNC, you’ll pay the lender directly for private loans. Agencies like Sallie Mae act as both lenders and servicers, making them another valuable resource for paying off your student loan.

stress, money, loan, hundred

Image via Pexels.com

3. How will I be paying my student loan?

You will need to select a repayment plan for your student loan. In some cases, usually with private loans, the lender will provide you with a monthly payment window for a fixed period of time. In other cases, you may be able to choose the due date and how much you pay in order to reduce the number of years you’ll be paying. Here are a few common repayment plans—most are only available to federal loan borrowers, but some private lenders may offer these as well.

Standard repayment: You will pay the same amount monthly over a 10-year term. This is sometimes the only option available for private loans, but just one option of many for federal loans.

Graduated repayment: You will begin with small amounts and work your way up to paying larger amounts for up to 10 years. The amount usually increases every two years.

Extended repayment:  You may choose to pay a fixed or graduated amount, but the repayment term can last up to 25 years.

Income-based repayment: Your monthly payments will be 10 or 15 percent of your income. The amount will be recalculated each year. If you are unable to completely repay the loan after 25 years, the remaining amount will be forgiven.

You should choose the repayment plan that will work best with your budget. If possible, choose a monthly due date that allows enough time to ensure you have the right amount, plus some wiggle room. For example, you may set your payments to be due a week or so after you receive your job payment. Talk to your student loan servicer or lender about setting the right monthly due date.

4. When must I begin repaying my student loans?

Depending on your lender or loan servicer, you will likely have a grace period before you begin paying off your student loans. Usually six or nine months, the grace period is meant to give you time to find a job that will help pay the bills. In some cases, you may have to start payments while you’re in school, or there is no grace period.

Direct subsidized and unsubsidized loans always offer a six-month grace period. PLUS loans do not have a grace period—payments must begin as soon as they are disbursed. You should check with your school if you have this type of student loan, and they can tell you when to begin payments.

Private loans usually have a short grace period, if any at all, so you should check with your lender to be sure.

One option that you can take advantage of during your grace period is to consolidate your loans—that is, to group your federal loans into one payment. This may make payments a bit easier to control if you have more than one student loan to keep track of.

You will have to consult the Federal Direct Consolidation Loan program to get started. You will fill out an application, sign a promissory note, and gather your loan records and account statements. The form will basic personal questions, what payment plan you’re using, and which loans you would like to consolidate. Check out the entire application process here.

repayment plans, student loan, infographic

Infographic by Elise Nelson via Venngage

5. What should I know about student loan interest rates?

The interest rate can often get money-borrowers into trouble with debt. It adds up, so you definitely need to be aware of interest when paying student loans.

Interest is part of why it is so important to shop around for loans, especially private loans. According to the Federal Student Aid Office, interest is “a loan expense charged for the use of borrowed money.” The added fee will be paid on top of the money you borrowed.

Your interest will appear as a percentage on the student loan’s promissory note—that number is based on the exact amount given to you in the loan. The note will also tell you the date that interest will begin to accumulate, and whether it will be charged daily or monthly (known as accruement).

Thankfully, you are able to calculate how much interest you owe on your student loan, which will help you plan a budget. If you’re handy with numbers, you can do the math yourself. Alternatively, interest amount calculators online can do the math for you.

Divide your loan’s interest rate percentage by the number of days in the year to find your interest rate factor. Then, multiply your outstanding loan balance by the number of days since your last payment. Finally, multiply this amount by your interest rate factor to see the interest amount.

Find the interest rates for federal and private loans, plus more student loan interest rate information, here.

6. What will happen if I fall behind on payments?

If you’re finding it difficult to keep up with your student loan payments, you may see late fees popping up on your bills—usually, this fee is about 6% of the payment amount.

Even if you are struggling to meet payments, you should never simply stop paying. This can result in some serious consequences. For one thing, missed payments will appear on your credit reports and severely harm your score. This may lead to problems with opening credit accounts or applying for other loans in the future.

Missing payments on federal loans especially won’t look good in the end. First, your loan will be considered delinquent the day after you miss a payment and will continue to be delinquent until you repay the past amount due. Over 90 days of delinquency will result in your loan servicer reporting the issue to credit services.

Around nine months of missed payments will result in your student loan defaulting—the exact time varies by the type of loan you’ve borrowed. You can find the consequences of a federal loan going into default here.

Unfortunately, your student loan won’t disappear until you pay it off. The solution, if you’re struggling to meet payments, may be to change your repayment plan. There are a few different income-based options you can try—talk to your lender or loan servicer about switching plans.

7. Can I receive student loan forgiveness?

Depending on your profession, student loan forgiveness programs are a possibility.

Any balance remaining in an income-based repayment plan will be forgiven after 10 years if you spend that time working for a public service sector such as the military, public education, or police work. For example, according to Debt.org, “you can have up to $17,500 in loans forgiven if you teach in a low-income area for five years.”

This is known as the Public Service Loan Forgiveness Program, and it’s just one option for federal loan forgiveness (PSLF is not available for private loans). The program will require you to submit an Employment Certification Form every year and provide work documentation as requested.

You may also be eligible for student loan forgiveness as a doctor or nurse. Nurses in high-need areas can have up to 85% of loans forgiven with the NURSE Corps Loan Repayment Program. There are a number of programs for doctors, both nationally and locally, depending on the practice.

The Department of Justice will provide $60,000 in loan forgiveness for lawyers who work there for three years or more. The Air Force Judge Advocate is also available for lawyers and offers up to $65,000. Your best bet as a lawyer seeking student loan forgiveness is to check with your law school—some colleges will forgive student loans for people making less than $60,000 annually. Requirements will vary by school.

See a breakdown of eligible jobs here.

graduation, college

Image via Pexels.com

8. How can I pay my student loan off faster?

If you maintain a plan for paying off your student loan, you’ll have it done much faster. You can look ahead and calculate how long it will take you to pay off your debt if you continue to make minimum payments. Then, if you feel you can afford to pay more than the minimum, add that amount and recalculate to see how much time you will save.

You can also make extra minimum payments on top of the usual 12 per year whenever you’d like. Forbes advises you to make one extra payment every 3 months (so, 4 extra payments per year).

Another option like this is to make lump-sum payments. It may seem like more money than you can afford, but when you choose to make large payments, you’ll finish much sooner and it will actually save you money (remember the interest).

When you plan on making larger or extra payments, it’s a good idea to hold off on luxuries. Ask yourself if you would rather have a new wardrobe or get out of debt. Save up as much as possible by trying to keep a minimalist lifestyle.

Once you get these questions answered, you’ll be able to tackle your student loan payments with ease. Don’t be afraid to ask your school’s financial aid office for help! You can also check out the Federal Student Aid website for more information on federal and private loans.

Follow Uloop

Apply to Write for Uloop News

Join the Uloop News Team

Discuss This Article

Get Top Stories Delivered Weekly

Back to Top

Log In

Contact Us

Upload An Image

Please select an image to upload
Note: must be in .png, .gif or .jpg format
OR
Provide URL where image can be downloaded
Note: must be in .png, .gif or .jpg format

By clicking this button,
you agree to the terms of use

By clicking "Create Alert" I agree to the Uloop Terms of Use.

Image not available.

Add a Photo

Please select a photo to upload
Note: must be in .png, .gif or .jpg format