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How Do You Repay a Student Loan?

How to Repay a Student Loan

Student loans can help you pay your tuition fees and cover the additional cost you will have during your education. Thanks to these loans you can get a degree in a time when you don’t have such a large amount of money. When you are going to get a student loan, you should also know how to repay a Student Loan.

Then after you completed your education, you can repay this loan in pieces and pay it off much easier than covering all the expenses during your education.

But, how does repaying your student loans work? What is the typical repayment plan? And, what happens if you fail to repay? Here, we are looking at these details.

How Do You Repay a Student Loan?

If you got a student loan for your education a while after you get graduated, your lender will expect you to start making repayments. This also applies if you leave the school., got expelled, or your enrollment time drops under half-time. Your lender will know about such changes and start your repayment process.

Of course, repayments do not start right away. With most student loans, there is a grace period after you graduate or fall under the other cases we mentioned earlier. During this grace period, you are not required to do the payment. Generally, this period is six months, but some lenders can offer a longer grace period. This time allows you to find a job and get some income to handle you repay a Student Loan after your education.

After your grace period is over, you will start making monthly payments to your lender. The size of these payments can vary depending on the total loan amount you got, the interest rates, and the repayment term you accepted.

Repayment Advantages of Federal Student Loans

The repayment term is the time window that you will pay off your loan debt completely. Federal student loans typically offer a 10-year repayment term but it is also possible to increase this time with an extended repayment plan.

Another advantage that federal student loans can offer is the ability to choose income-dependent repayment. This method makes your monthly payments change depending on your current income level. So, if your income is low, you do not get overwhelmed by repayments or fail your payments. On the other hand, if your income increases your repayments will increase too. Of course, these changes will shorten or extend the total time you will need to make payments.

Monthly Repay a Student Loan

Typically, when you get a student loan, your lender gives you a series of coupons or statements that represent each month you need to make a payment. When you make a payment towards your loan debt, you will give the coupon of that month with your payment.

However, these days most lenders offer auto-payment plans for loan repayment. Many of these lenders even offer some benefits, such as an interest rate discount, if you use this auto-pay method. This way you do not need to remember sending money for your repayment, and it will be sent from your bank account automatically. So it is practical too.

What Happens If You Fail To Repay a Student Loan?

There are various practices towards a borrower who misses their payments or do not make payments at all. These usually involve a punishment fee.

As you can imagine, lenders apply a late payment fee after you missed the day of the month that your payments were due. This fee will be reflected in your next payment or added to your total and extend your repayment term.

But if you do not make the payment for a longer time there will be more significant consequences. Private student loan lenders consider 120 days as the limit. After this limit, they put you in a category called ‘default’. For federal loans, this limit still exists but it is 360 days. Being on the default list will make the government cut a portion of your wages to compensate for your debts. This portion can be as large as 15% percent of your wage and your tax returns.

Not good for your credit score

Also don’t forget that, in both cases, it won’t be good for your credit score. Especially if you fall in default, it will get a hard strike. And you will have problems the next time you needed a loan. So you should certainly avoid missing payments if you have the money to make the payments.


How Do You Repay a Student Loan?