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Student loans offer multiple payment options based on the borrower's financial situation. You won’t need to start repaying your loan until you’ve graduated, unless you’ve dropped out or have fallen below half-time enrollment. Before your first payment is due, you typically will be given a grace period of six to nine months, starting the day you drop below half-time enrollment status. This will give you time to find a job and get your finances together. However, with an unsubsidized loan, the interest will begin to accrue as soon as your loan is disbursed. It may be wise to set up a payment plan that allows you to pay just the interest while in college. This will help lower your future monthly payment and the total cost of the loan. Otherwise, you can choose to add the interest that accrues while in school to the balance of your loan and pay it as part of your monthly payment after your grace period expires.
When the time comes to begin repaying your loans, it's important that you speak with your lender about a repayment plan. Effective for loans with a first disbursement on or after July 1, 2006, the interest rate for Federal Stafford Loans is fixed at 6.8%. For loans with a first disbursement on or before June 30, 2006, the interest rate for Federal Stafford Loans is variable, adjusted annually on July 1, and cannot exceed 8.25 percent over the life of the loan.
If you miss or fall short of a payment, your loan will become delinquent and may even default. A defaulted loan will have a negative impact on you, costing you more money and leaving you with a bad credit rating for up to seven years after the loan is paid in full. A bad credit rating can affect your opportunities for employment, credit approval, future loans and buying or renting property. Avoid default altogether by discussing alternative payment arrangements with your lender. Remember, if you are experiencing extreme financial difficulty, are back in school, or have other extenuating circumstances, you will need to contact your lender to discuss if you are eligible for a deferment or forbearance. To bring a loan out of default, you can either pay the loan in full, agree to repay it through a loan rehabilitation program, or apply for loan consolidation.
To help you manage your student loan debt and to repay your loan, stay in touch with your lender, financial aid office or ISAC, if your loan is guaranteed by the Illinois Student Assistance Commission. Also, read any mail you receive regarding your loan, keep records in a safe place, stay current with your payments, and write your loan-account number on all correspondence pieces with your lender, and on your payments.
If you have any questions about your loan and/or grant amounts, outstanding balances, disbursements or loan statuses, check with the National Student Loan Data System (NSLDS).
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