Armed with a college diploma and plans to find your first job, it will soon be time to face another reality -- paying back your student loans.
Student loans usually have a grace period of six to nine months. Student lenders offer a variety of loan repayment plans limited only by lenders' marketing prowess. A standard repayment plan requires you to make regular monthly payments. At first, most of your payment -- perhaps all of it -- will go to repay any accrued interest.
The repayment period for most student loans is 10 years. If you make smaller-than-required monthly payments, your loan term will increase and you will pay more interest. If you make larger-than-expected monthly payments, your loan term will decrease and you will pay less interest. You may be able to deduct up to $2,500 of your interest expense on student loans on your federal income tax return. As a result, you will pay a lower after-tax interest rate.
You may also wish to consolidate your student loans using a federal consolidated loan. Sallie Mae and other lenders offer these loans as a means of combining all of your student loans into one loan with a single payment. The interest rate ceiling on a federal consolidation loan is currently 8.25%.
Whatever you do, don't suddenly stop making payments on your student loans. If you do, you will become delinquent and damage your credit history.
