Student Loan Payback Options

Borrowing money for college through private student loans comes with the understanding that the money will be paid back within a certain time frame. Without the loan, the student may not otherwise be able to attend college. Statistics show that those with college degrees or certificates from special training programs earn more money in a career. As a result, many private lenders are willing to offer student loans as a means of helping people to better their lot in life while earning interest on the amount they lend. The borrower pays back the amount they borrowed plus the interest charged. The terms of repayment are agreed to before the student is given the money for college.

Interest Repayment
While the student is in school, the interest is covered in monthly payments. Since the interest is a much smaller figure than the actual student loan amount itself, this is often manageable. Students involved in work study can afford the small figure while they are in school. The alternative is to pay back the interest while paying off the all-inclusive loan after graduation. Depending on the terms, the student can save up to 30 percent of the total, as compared to a deferred payment plan.

Fixed Repayment
Some lenders allow students the opportunity to begin paying off the money while still in school. This is a small amount every month compared to what will be due monthly upon graduation or discontinuation of school. Students can save up to 20 percent of the total, as compared to the total loan cost with a deferment. There are also lenders that do not allow early repayment without penalty. The fine print of every agreement should be read before signing anything, just to ensure complete understanding of the transaction.

Standard
The most common form of loan repayment is, of course, the standard. Upon completion of school through graduation or failure to continue enrollment, the student loan is paid. The most typical form is in payments on the same date of every month until the total amount is repaid. When payments are made on time and in the proper amount, the student will receive a good credit rating. When payments are late or too small, there are fees and penalties tacked on to the payment. This often causes a snowball effect, making it difficult for the borrower to catch up. Otherwise, the properly handled loan will help a person establish their own credit in good standing.