Home > Students > 4 Things Soon-to-be Grads Should Know About Student Loans

Comments 0 Comments

It’s easy to have a stress-free attitude about student loan debt in college, especially if your pay period hasn’t begun. However, to some, student loans can be like speaking a different language, so it’s important to understand how they work before you fall into bad debt. Here are the top things to know before your student loans kick in.

1. There Are Different Repayment Options

Once students graduate, they are automatically enrolled in the standard repayment plan. However, there are other plans out there that may be more beneficial. Consider doing a little research on payment plans before your loans begin. Graduates are responsible for contacting their lender to find out when the first payment is due. You can then ask if you qualify for an extended or graduate payment plan.

If graduates expect to see a steady increase in their income over time, the Graduated Plan will likely be the right choice for them. With this plan, monthly payments start low so they’re affordable and then increase after two years, usually over the course of a 10-year plan. You can also choose an income-based plan, where monthly payments are based on how much you earn. These payments are usually lower than those of a standard payment plan.

2. Interest Can Kick in as Soon You Get the Loan 

An interest loan is tacked onto your loan automatically; sometimes this can be fixed, and sometimes it is variable. If you have a variable-interest loan, then this means your interest is subject to change over time. If you have a fixed-interest rate, then it will always stay the same. If you are a student working in college, then you may want to consider paying interest in school. This will help you pay off your loans quicker (and more easily) once you graduate. Keep in mind, interest accrues the second you take out the loan. If you choose to pay your loan early, however, your monthly interest payment while in school could be as little as $100 each month.

3. Deferment and Forbearance Are Two Separate Things

Under certain circumstances, graduates can receive a deferment or forbearance that allows them to pause or reduce their federal student loan payments. Postponing or reducing payments may help them avoid default. Forbearance allows you to make no payments, or reduced payments, for up to a year, but interest will accrue on your subsidized and unsubsidized loans (including all PLUS loans) during this period. A deferment is a period in which repayment of the principal and interest of your loan is temporarily delayed. Different situations can make you eligible, such as unemployment. Most deferments are not automatic; you’ll need to submit a request to your loan servicer.

4. The Sooner You Pay Off Your Debt, the Better

It’s important to research strategies to pay off your student loans as well as repayment options. Try to complete your exit counseling at your school to learn about your legal rights and responsibilities as a borrower. Then learn how much you owe and to whom. For example, ask yourself: Do you have federal loans and private student loans? How much do you owe on each? Find out when you can start making payments. Most forms of federal student aid will require you to start making payments after six months; private lenders may set other deadlines.

Soon it will be time to start repaying your loans. Understand that smaller monthly payments mean you’ll pay more over time, so if possible, make additional principal payments. This will allow you to pay your loan off faster and pay less interest over time. Budget carefully and identify expenses you can cut so you can put the money toward student loan payments. Lastly, try to avoid taking on more debt until you pay down your student loans. (You can track how your student loan debt is affecting your credit by viewing your two free credit scores, updated monthly, on Credit.com.)

More on Student Loans:

Image: Nick White

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team