A student loan is designed to assist students pay for tertiary level education, such as university tuition, books and living expenses. It differs from other types of loans because the interest rate maybe substantially lower and the schedule for repayment are usually deferred until the student has successfully completed their education.
Jhenelle Williams was the first person in her family to go to college. Her mother refused parent plus loans because she said she would appreciate her education even more if she paid for it. Jhenelle states that “her financial advisor never explained loan differences and said Sallie Mae is an easy affordable way to take out loans once grants and Stafford loans run out.” Now she is two classes away from graduating with over $175,000 in primarily student loan debt. Interest accrues each month on your loan from the day it is disbursed even if you are not required to pay it until later. The interest is then compounded and added to your principal and the cycle goes on.
Student loans offered by banks lack the flexible repayment options offered by federal loans. For federal student loans you can possibly reduce your payments with an extended, graduated or income based repayment plan. These options allow you to make the best decision regarding your repayment plan. You can choose an option that best suits your specific needs. The graduated plan allows your payments to start low and gradually increase over a two year period. This is a good option for graduates who expect their income to increase rapidly as they gain experience in their chosen field. Individuals can stretch their repayment period for up to 25 years with the extended plan. This is a good option if individuals have debt over 30k. However it is important to note that overall costs will be higher due to increased interest rates. Depending on your level of annual income, household size and loan balance you can opt for an income sensitive or income contingent plan. If you are uncertain about your future income or your earning potential is unstable this option might be best for you.
Student loan debt can almost never be discharged even if you file for bankruptcy. The Education Credit Management Corporation sited that of the 72,000 federal student loan borrowers who filed for bankruptcy in 2016, only 29 cases successfully had part or all of their student loan debt discharged. Student loans therefore become the last and sometimes only resort for individuals whose ambitious drive wants them to achieve more by attaining a solid education. The bankruptcy laws were changed in 2013 so that private student loans could not be easily discharged, unless repaying the loan would create an undue financial strain or hardship for the student borrower and his or her dependents
Student loans for some are sometimes the difference between an education and a life that is impeded due to a lack of education. Many families simply cannot afford the expenses associated with sending their children to a good college for tertiary level education. Mothers and fathers start worrying about the expenses of college from as early as the day you were born. Take the time out to do thorough research to lessen the impact and burden of taking on a student loan.