By the time you are a high school senior or a college student, you’re supposed to pay attention to your financial condition. Otherwise you’re asking for trouble. Now you probably know Federal Loans are a way of paying for college. If not for that many kids would only be dreaming of college.
But because they seek these loans, many students enter into large debts after they graduate.
Things to know beforehand
- Responsibility for the loan is on the student. Students commonly take loans to get a seat at a college, and disregard the debts they make. The loans will have to be paid back eventually.
- The difference between subsidized and unsubsidized loans: Subsidized loans are not due repayment until 6 months have passed after the last day in school. The interest on them is paid by the government. Unsubsidized loans are due starting when the loan amount is handed over to the recipient. Payments on the principal can be deferred until you graduate, and the interest is due from the date on which the amount had been disbursed. The interest amount can also be deferred, but it would then be capitalized (The amount of interest is added to the principal amount of loan, so you have a capitalized interest student loan).
- Loan limits can increase each year – the more you take, the more you have to repay.
- Failure to repay can ruin your credit score. When you graduate, the loan amount becomes due for repayment. If you are unable to repay it your credit score will be badly affected, as be reported to the credit agency.
- Deferment of loans: You could make all sorts of deferments if you’re unable to repay it. That’s a lot better than not paying at all. In the days of deferment your debt will increase due to interest accrual, especially if it’s a capitalized interest student loan. Eventually it takes longer to be done with repayment.
Loans are debts till you graduate, and they have to be repaid after this. Deferment and forbearance can only help delay the payments, but you cannot escape the repayment of loans. So it’s a good bet if you have a repayment plan laid out well in advance.