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 any government agencies. 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 actually have to start repaying those private student loans, regardless of your overall financial or educational situation.
Here are a few questions to keep in mind when reviewing private student loan repayment conditions prior to signing on the dotted line.
When do I have to pay?
Hopefully, you’ve read your loan agreement before signing and have an idea of when your private student loan repayment should start.
For federal student loans and most private student loans, repayment starts six months or so after you’ve graduated from college. This is typically the industry standard.
While student loans get you the money you need to pay for college, after you graduate you’ll be paying a lot of money in interest for loans you took out years ago.
Thankfully, most private student loans have caught on to the fact that students can’t pay while they’re still in school. However, some still do require in-school payments. Always make sure you read over your loan documents before you sign them.
What’s a grace period?
Most private lenders offer a six-month grace period after you graduate during which you don’t have to make student loan payments.
A grace period gives you a little time to get on your feet, find a job, etc. Check your loan agreement to see what kind of grace period you have.
You should use your grace period to your advantage by saving aggressively while you aren’t making monthly payments. Try and 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 loan payments by paying them. Then, once your private student loan repayment period officially begins, you’re already a little bit ahead of the game.
Can I defer my student loan payments?
Deferment is another option for giving yourself more time before you have to repay your student loans.
It’s more commonly offered for federal student loans, but some lenders also 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 in an internship,check with your lender to see if they offer deferment or forbearance options.
Just remember that interest is still accruing even when you defer payments. So do the math and make sure deferment is financially the best option for you.
Should I start private student loan repayment while in school?
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.
On top of the principal of the loan, you’re also accruing interest every month even when you’re in school. That means you’ll be paying the principal, the 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. Plus, it will give you some relief when it comes to making full student loan payments after graduation.
Be your own advocate and make sure you fully understand what you are agreeing to when it comes to private student loan repayment before signing your documents.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.06% – 13.06%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.37% – 11.23%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|5.62% – 10.01%7||Undergraduate and Graduate|
|3.93% – 9.81%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|