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Student Loans | XL Financial Blog

Dealing With Paying Off Your Student Loans

Posted on 22. Jan, 2016 by in Financial Planning

Student Loans | XL Financial Blog

Many people who go to college take out student loans to do so. College is too expensive for most people to afford out of pocket, and very few people get full ride academic or athletic scholarships. Hence, the need for loans. Paying off student loans is not like the repayment of other loans, so you need to know the ins and outs of repayment plans.

Most student loans these days come from the federal government. The loans have a set interest rate, and you don’t have to make any payments as long as you are in school. Once you graduate, repayment usually begins within six months. You typically can choose a repayment plan that best suits you, paying more each month to pay off the loans faster or making lower monthly payments and taking longer to pay off the loans. If those payment plans are too much for you, you can apply to do an income-based payment plan, usually anywhere from 10 to 20 percent of your discretionary income, depending on the plan.

Since your interest rate is fixed, it may be higher than the prevailing rates when you have to start your repayment, so you may want to look into refinancing the loan. There are companies that specifically deal with refinancing student loans, but keep in mind that you have to have very good credit to get the best rates. You also may not get as long of a repayment period as the government gives you. You need to weigh the pros and cons before considering such a program.

One advantage to refinancing is that if you run into a financial hardship, your loan can be discharged in bankruptcy if that becomes necessary. That is not an option if the government still holds your loan. In fact, the government has been known to take people’s income tax refunds if they have past due student loan balances.

Getting a student loan can be a good idea to get a post-secondary education, but you don’t want paying it back to become a financial burden.



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