Know the Repayment Terms
When you borrow money, it eventually has to be repaid. Every loan comes with a set of repayment terms which include:
Other information you will need to know is the name, address and phone number of your lender and what happens if you are late or fail to make a payment. It is your responsibility as the borrower to communicate with your lender (or lenders) and to keep them informed of your most current contact information.
The best way to monitor your student loan borrowing is to determine what your monthly payment will be each time you agree to borrow. Financial calculators are available on the internet and they are easy to use. Try this example from Finaid.org. When you use this calculator you can also choose to see the payment schedule (amortization table). This will show you how much interest your debt will cost you over the life of the loan.
Remember - student loan interest rates are variable, and although they have been as low as 3.42%, Federal student loans can go as high as 8.25% — and that can mean a big difference in your monthly payment!
Interest Rate
Most student loans have a variable interest rate that could go as high as 8.25%. The interest rate is based on the 90-day T-Bill, and adjusted every July 1. If you have an unsubsidized loan, the interest rate will affect the amount accruing or the amount of your interest payments if you are paying accumulated interest.
Monthly Payment
Your monthly payment will be determined by the amount you borrow, the length of the repayment period and the interest rate. Even considering these factors, generally the more you borrow, the higher your payment will be. Even if you borrow very little at a low interest rate, the minimum monthly payment can be no less than $50.00.
Repayment Period
The standard repayment period is 10 years. However, when you go into repayment you will have the option to choose other terms. For example, you may extend the repayment period in order to make your monthly payments more affordable. Be aware that this means it will not only take you longer to be free of student loan debt, but you will be paying more interest over the life of the loan. It is much better to limit your borrowing so that you can afford to pay your loan off within 10 years.
Grace Period
The grace period is the time between when you leave school and when your first payment will be due. This period is usually six months. Remember that leaving school includes withdrawing and dropping below half-time enrollment.