Most young adults commonly have student loans, but few borrowers are aware of important details. Understanding student loan debt is crucial before borrowing. In this discussion, we’ll explore seven lesser-known aspects of student loans information, including faster debt repayment and various repayment plan choices.
1. You Don’t Always Need to Start Repaying Right Away
After graduation, most federal student loan borrowers are given a six-month grace period before they’re required to start making payments. Recent graduates can use this time to establish themselves in their careers and secure their financial stability before adopting a loan repayment plan. Private lenders might provide grace periods for specific loan types, so carefully review your loan terms before committing.
2. You Don’t Have to Pay the Interest During Deferment or Forbearance
Deferment and forbearance allow loan repayment postponement, but interest can still accumulate on your balance. Federal loans don’t accrue interest during postponement. For private student loans, interest accrual may vary by lender, so verify with your lender for clarity.
3. You Can Take Advantage of Different Repayment Plans
If you weren’t able to get a grace period or postpone your loan, there are still different repayment plans available to make managing payments a little easier. Depending on the balance of your loans and your income, you could qualify for income-driven repayment plans which can adjust your payments based on changes in your financial situation. Additionally, you can look into repayment plans that offer student loan forgiveness after a certain number of years.
4. You Can Repay The Loan Faster
If you want to pay off your loans faster, there are ways to do that. One option is to refinance. By consolidating your loans and lowering the interest rate, you could be able to free up more money to put toward the principle balance. You can also make payments multiple times a month or double up payments during months with extra money. Just be sure to check with the lender before making extra payments; some lenders may have certain regulations about adding to your loan payments beyond what’s required.
5. You Could Be Eligible for Student Loan Discharge
In certain cases, a student loan can be discharged. For federal loans, this typically has to do with disability or death, but there are other possible qualifications as well. Private loan discharge can vary, so you’ll need to check with the lender to see if you qualify.
6. Your Credit Score Can’t Be Hurt By Late Payments
If you’re having trouble meeting your loan payments, you don’t need to worry about your credit score. It’s illegal for lenders to put a mark on your credit report if a loan payment is late. To protect your credit score, contact your lender if you can’t make a payment, they may be able to set up an alternate payment plan or provide assistance to help you get back on track.
7. You Could Be Eligible for Tax-Deductible Student Loan Interest
If you’re paying interest on your student loans, you may have already noticed the loan interest deduction on your tax return. You can deduct up to $2,500 of the student loan interest that you paid over the course of the year. This helps to ease the burden of interest payments and could help you save money on your taxes. Be sure to check the requirements to ensure that you are eligible for the deduction.
Final Thoughts
Student loan debt is a reality for many recent graduates, but there’s still more to know. From deferment and forbearance periods to repayment plan options, understanding the details of student loans can help you manage your debt more effectively. With the right information and preparation, you can make the most of your student loan debt and get the financial help you need to achieve your academic and career goals.
