Managing Student Loans: Learning the Skill

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Published: 29th August 2012
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Over the years, much attention has been drawn to the repayment of students loans. Many public and political debates have been centered around the concern of students paying back their educational loans. According to the Institute for Higher Education Policy, of all student loan borrowers, two-fifths are delinquent at least once within the first five years. While it can be challenging for some, many students pay back money for college without struggle. Managing student loans is possible when the college graduate has learned the skill of budgeting and understands how student loans work. These are some of the basic areas that students must pay attention to in order to avoid defaulting on their educational loans.

Creating a Budget
The most important step to managing student loans is taking it seriously and setting aside the appropriate amount of money every month. This is money that should not be touched for other purposes and is always paid on time. This keeps payments low and helps to prove the individual's reliability as a borrower. When the process is complete, these individuals will not only have a higher education, they will also establish a positive credit history that shines when they hope to buy a car, a home, a new stereo system or even go back to school for a more advanced degree.

Contact Information
One reason borrowers default is because they don't start paying back their student loans on time. The company that manages their account may not have the correct contact information, so the individual never receives notice or paperwork that their payments are about to begin. Some students may feel that not receiving a request for payment is enough reason to avoid making one. However, once their credit is affected, it is usually clear that the opposite is true. Supplying and updating correct information to the account manager is a critical step in avoiding late payments, late fees and poor ratings on credit reports.

When someone receives a student loan, a percentage of that amount is added to the total. It is basically a fee charged by the lender for giving the student the money. The longer it takes to pay off the balance, the more interest accrues. The higher the interest rate, the higher the percentage of money the student owes. Some lenders allow borrowers to start paying back the interest early to lower the total amount owed.

Late Payments
When a payment is late, most companies will charge a fee. When the payment is made, the fee amount must be included in the payment. Additionally, the fee is included in the total amount owed, so the borrower often winds up paying interest on the fees as well. In some cases, the later the payment, the higher the fee. After a long period of time without any payments made, the lender may consider the loan in default. This means that they have given up on being paid without taking drastic action, such as a judgment or lien against the individual. This can prevent the person from establishing good credit to buy a car, a house or even use a charge card. According to the Institute for Higher Education Policy, two borrowers become delinquent without defaulting on their student loans for each borrower who does default.

The best course of action for those with student loans is to start making payments before or as soon as they are due. However, for students who graduate from school and cannot start making payments on time because they are not making enough money, the best course of action is to notify the lender. Oftentimes, the payment amount ca be lowered or pushed back. When it is pushed back, this is called a deferment. The interest may continue to accrue or may be put on hold, depending on the situation. Eventually, the person can start repaying the money and establish a reliable credit history.

Author is a freelance copywriter who writes frequently about available options for student loans for those planning to enter college. If you are interested in educational loans, be sure to visit

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