By Meghan McCloskey
Graduation from college presents many exciting possibilities and opportunities for a student. This is the transitional time from being a college student to becoming a member of the working world. However, not all aspects of moving on from college are exciting. The prospect of paying off student loans is often a stressful element of a student’s life after graduation.
Most students enrolled in college at least part time apply for a loan to help them meet the ever-increasing costs of higher education. A large percentage of these students apply for the Federal Stafford Loan. This type of loan is the most popular government-based loan for college students. It is disbursed over two periods of each school year, building up over the four years that a student will attend a university.
After graduating, students have a period of time, known as the “grace period,” before they must begin to repay the loan. For most loans, the period is six months long. Once the grace period is over, the loan must be paid off in about ten years. Monthly payments are based on the amount of debt and the length of the repayment period.
Unfortunately, many students run into problems when it comes time to repay their loans. Often, the cost of loan payments is overwhelming due to the loan total and the added interest rate. In addition, many students have acquired additional debt through alternative loans that were used to cover the costs that were not met with the Stafford Loan.
If a loan payment is neglected, a student could default on their loan. Defaulting has severe consequences. It is very important that the loan is paid properly and on time. The current default rate for students is 5.2 per cent. This is a relatively low percentage according to the Department of Education and Federal Student Aid. However, punishment for the students in this percentile can result in added interest to the loan, damaged credit, deduction from a paycheck, and ineligibility for future student aid.
There are options for students who cannot make payments right away. In this case, a deferment can be requested and approved by the loan provider. A deferment is a temporary suspension of a loan payment for certain situations. Deferments are not for everybody; in order to receive one, the student must be re-enrolled in school, unemployed, or going through a tough time economically. It is usually difficult to be approved for a deferment. Furthermore, loans that are unsubsidized still collect interest over a deferment period.
A student struggling to pay their loan can also seek forbearance on a loan. Forbearance is a temporary reduction of payments for a set period of time. The student must be going through financial difficulty in order to receive this.
Not all aspects of life for a newly graduated student are appealing. Paying off student loans becomes a part of life and must be dealt with shortly after graduation. Taking care of a student loan after graduating is one of the first signs that a student has crossed the threshold into the real world. It is one of the first tests of responsibility, but certainly not be last.