Student loans have become an important aspect of a college education. Failing to pay back federal student loans can have dire consequences, including damaged credit scores and the possibility of having your earnings garnished and tax benefits withheld. You may have a lot of questions relating to student loan repayment. The goal of this article is to address some of them such as without proper generalization and understanding of the issue students can become victims and suffer many years when trying to repay the loan.
All of the When, Why and How of Paying Back Federal Student Loans
You have taken student loans to help with your education. What next? Let us begin this article with the basic question: do loans have to be repaid? Yes, of course. When you signed the document accepting the student loan, you also entered into a legally binding agreement to pay back the loan, along with any relevant interests and fees. However, here is some good news. You do not have to pay back your student loans until following your graduation from college. Of course, this rule does not apply to PLUS loans, which enter into repayment immediately the full loan disbursement.
But how are student loans paid out? First, your lender or loan service provider should issue you with a schedule for the repayment, which states when the initial payment is supposed to be made, the frequency and number of remittances, as well as the amount for each monthly submission. The repayment schedule is essentially the timeframe during which the borrower is expected to pay off the loan. For example, in the event that you pick the standard 10-year plan for FAFSA government student loans, you will have to make at least one payment every month for the next 10 years. Check with your provider and note down the dates when you are meant to begin repayments.
You have to remember that your student loan can come with a grace period. This is the duration when you are allowed to make arrangements on how you intend to approach the repayment federal financial aid loans. Most student loans are given a grace period of six months, meaning that borrowers do not have to begin making payments until six months after graduation after they drop out of college. There are, however, no standardized rules for private loans in relation to when repayment should start. Make sure to confirm with your lender. In addition, not all student loans FASFA come with a grace period.
Can the Grace Period for Federal Loans Change?
An important question to ask in relation to how to pay FAFSA loans is whether the grace period can change. Here are some circumstances where the time when you are expected to start repaying your student loan can change.
- Resuming studies before the expiry of the grace period
In the event that you re-enroll in college at least half-time before the culmination of the grace period, you will likely obtain a full-six-month grace period when you graduate or drop out before half-time enrollment. Please note that other conditions may apply.
- Active military
The grace period can also change when one is called to active military duty for more than 30 days before the end of the grace period. In such a case, the borrower will get the entire duration of the grace period upon returning from active duty after which he or she will be expected to pay back FAFSA loans.
- Loan consolidation
Some students combine loans for a single repayment plan when trying to figure out how to pay FAFSA student loans. Under a new facility during the grace period, it is highly likely that you will surrender the remainder of your grace period.
Can You Get Free Loans No Pay Back?
Well, loans are meant to be repaid. However, if you want ways to finance your education without the burden of taking loans, you could consider applying for grants. Unlike student loans, grants do not have to be paid. Grants are typically based on needs and can be given by federal and state governments. To qualify, students have first to fill out an application, which allows colleges to ascertain your level of need and how much of the aid you qualify for. Here are some specific college grants for students, which could be used instead of or to supplement student financial aid loans:
- Federal Pell Grants
- TEACH Grants
- Iraq and Afghanistan Service Grants
- Federal Supplemental Education Opportunity Grants (FSEOG)
Are Scholarships Loans You Don’t Have to Pay Back?
Other than grants, a good source of free financial aid is scholarships. However, this source of funds is largely based on merit. In other words, your qualification will depend on your achievements in athletics or academics or your religious and cultural background. Those who have specific skills or talents can also qualify for specific scholarships. In reality, most students receive scholarships from the college they attend, often offered during application. Consider grants and scholarships as ways of supplementing student loans.
This article has explored how to pay off FAFSA loans, as well as options for free financial aid. For the sake of your credit scores, and to be able to access future financing, it is best always to pay your loans on time. Ask your provider to help set up a repayment plan. During hard times, you can always apply for forbearance and deferment. The key lies in careful financial planning; thus, you can learn and understand all of the peculiarities in details.