Graduating means paying off loans for most of students, which can be extremely confusing, complicated and full of fine print. While parents may play a part in figuring out financial aid for some college graduates, most universities such as Bowling Green State University (BGSU) ask their students to educate themselves on the ins and outs of federal law relating student loans.
Figuring It All Out
Legal jargon may confuse many when it comes to deciphering the actual due date, interest rate and rules of student loans. I spoke with Kevin Pence, a BGSU student who filed for independent status from his parents at age 18. Pence described his self-educating process of learning the legalities behind paying off loans and all the fine print that follows.
Pence explained, “Although, I was thrown into figuring out serious information at a younger age, I strongly encourage all students with loans to start learning about them before they graduate. They should figure out what they are eligible for, make a plan and act. Whether independent from their parents or not I find it important to be able to understand your loan situation before entering into the real world.”
Pence advised fellow students to call their loan companies, both federal and/or private, and simply ask questions, “Get acquainted with your balance and what you are applicable for such as the Income-Based Repayment option or other deferment options.”
Difference Between Federal & Private Loans
There are two types of loans students can receive aid from, one being the federal government and one being private firms. An example of a popular private loan company would be Sallie Mae, while federal loans are known as direct loans.
Direct loans can be classified into two categories, subsidized or unsubsidized. Subsidized loans are those in which students gain interest during their entire time while taking classes. Unsubsidized loans are those in which students gain no interest on their loan amount until they have graduated.
When to Pay
According to the private loan company Sallie Mae, for their private loans, clients will have a six-month grace period before they must start making payments on their debt, if they have chosen to wait to pay until after graduation. I spoke to a Sallie Mae representative who explained after an allotted grace period clients must enter into what is called a re-payment period. This is the period in which students will start making payments to their loan amount.
If after the grace period clients cannot make payments, the Sallie Mae representative explained students can apply for different types of deferment (putting off your payments) or forbearance. Forbearance is fairly simple but can be costly through some private loan companies. It can be processed over the phone, but comes with a few rules. According to the Sallie Mae representative, here are the forbearance rules this private company offers for it’s clients.
- Forbearance can put off the client's payment on their loans for up to three months.
- It comes with a minimum fee of 50 dollars and a maximum fee of 150 dollars per loan.
- Clients must be within "re-payment status" before they can enter into forbearance.
Another option students should check out when it comes to paying back loan amounts is the Income Based Re-Payment (IBR) option, supported and established through the Obama Administration. Pence, who plans to enroll in the program explained it as monthly payments based on the students average annual income after college. After approximately 25 years on the payment plan that is customized to each individual person's budget, the United States Government will dissolve the outstanding loan amount. For more information about the IBR program or to calculate an IBR estimate, check out http://www.ibrinfo.org/.
What is Required
Before graduation, a BGSU financial aid representatives suggested that students check with their university to see if they are required to attend "exit counseling" for their loan balances. Exit counseling through BGSU, is a program designed to prepare students for making payments to their loan amounts after graduation. It informs students of their financial obligation to the federal government and to private loan companies. According the BGSU financial aid representative I spoke with, students would have their diploma withheld if they do not complete the exit-counseling program.
Posted by: Taylor Ray
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