What do you do when your federal student loan doesn’t cover all of your college expenses?
Most likely, you’ll turn to private student loan lenders, like Sallie Mae, or a personal bank or credit union. While private student loans can help you cover all of your college costs, they can wreak havoc on your finances down the road.
That’s because private student loans aren’t regulated by the government. So private lenders get to set all the terms and conditions on the student loans they offer. Most importantly, private lenders get to decide when you pay back private student loans, regardless of your overall financial or educational situation.
Here are questions to keep in mind when reviewing private student loan repayment conditions before signing on the dotted line. After all, you don’t want to be wondering this after you’ve already signed the agreement: Do you have to pay student loans while in school?
When do you pay back private student loans?
How long can you be out of school before you have to pay loans?
Can I defer private student loan payments?
Should I start to pay student loans while in school?
Student loans get you the money you need to pay for college, but after you graduate you’ll be paying a lot of money in interest for loans that you took out years ago. Borrowers often wonder if they have to pay student loans while in school. Thankfully, most private lenders realize that students can’t repay loans while they’re still in school. However, some lenders still do require in-school payments.
Always make sure you read your loan documents carefully before you sign them. They should give you an idea of when your private student loan repayment should start. For federal student loans and most private student loans, repayment typically starts six months after you graduate from college.
Some private lenders offer a grace period after you graduate during which you don’t have to make student loan payments. The length of the grace period may vary, but it’s usually about six months. Be sure to check your loan agreement to see what kind of grace period you have.
A grace period gives you a little time to get on your feet and find a job. You should use the time to your advantage by saving aggressively while you aren’t making monthly payments. Try to tuck away a few hundred dollars each month for your student loan payments, and don’t let lifestyle inflation set in.
Or, if you have the financial means, consider getting a head start on your student loans by starting to repay them. Interest can keep accruing even during a grace period. So making payments during your grace period allows you to avoid additional accrued interest, which can save you money in the long run. Check with your lender about prepayment penalties, as some lenders will penalize you for prepayments. Once your private student loan repayment period officially begins, you’re already a bit ahead of the game.
Another option for giving yourself more time before you have to repay your student loans is deferment. It’s more commonly offered for federal student loans, but some lenders may offer deferment options for private student loan repayment if you meet certain criteria.
If you’re going back to school, have a limited income or are enrolled in a certification class or an internship, check with your lender to see if the company offers deferment or forbearance options. Just remember that interest may still accrue even when you defer payments on private student loans. So do the math and make sure deferment is financially the best option for you.
While most student loans don’t require payments while you’re in school, that doesn’t mean that you shouldn’t start paying them off early if you can afford it.
One of the biggest reasons to start making payments on private loans right away is the interest.
You accrue interest on the balance every month — even when you’re in school. That means you’ll be paying the principal balance, interest and the interest on that interest if you don’t start private student loan repayment early.
Paying off some of that interest while you’re still in college will also help your overall loan balance stay manageable. Early payments made during undergrad can be as little as $25, too. Plus, it will give you some relief when it comes to making full student loan payments after graduation.
Regardless of whether you pay student loans while in school, make sure to be your own advocate and ensure you fully understand what you are agreeing to when it comes to private student loan repayment before signing your documents.
Sage Evans contributed to this report.
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|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for Discover.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
4 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).
5 Important Disclosures for Citizens.
Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.80% – 11.06% (2.80% – 10.91% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.
Please Note: International Students are not eligible for the multi-year approval feature.
|2.84% – 10.97%1||Undergraduate, Graduate, and Parents|
|2.87% – 10.75%*,2||Undergraduate and Graduate|
|2.80% – 11.37%3||Undergraduate and Graduate|
|3.52% – 9.50%4||Undergraduate and Graduate|
|2.80% – 11.06%5||Undergraduate and Graduate|