Bad Credit Student Loans
Repaying student loans is a matter of choosing among several strategies and options. Avoiding default in repayment is a must; avoid a bad credit student loan by learning that it is only a matter of making sure to use resources in the best possible way.
Through much experience with bad credit student loans, many colleges presently use ‘default prevention’ programs. These programs help to put you on the right track toward repayment of your loans. You can ask for help and advice about these specific programs at your college loan exit interview. Here you will be told how to make prompt payments with an added option that allows for online or automatic payments.
Estimate your expected annual debts and make a plan for repayment of your loan. Since estimating or guessing what a future income will be is nearly impossible, the correct plan of action is to make a "backwards" plan – to avoid making a bad credit student loan you must be aware of your annual expenses. Make a projection of your income by estimating your monthly expenses. This will give you an idea of what income you will need to live comfortably.
Save! Make a gross estimation that the monthly payments for your student loan(s) will be around 8%, and total expenses for fixed debt around 35-40%. Don't let a bad credit student loan grow as your income increases during the coming years; your debt-to-income ratio should go down, allowing you the chance to invest and retire other debt. You can even make a plan for putting some money away each month.
A bad credit student loan may involve some laws that address your status as a borrower even before your loans technically are “due”. Some of these laws involve revealing pertinent information, for example, you must keep your lender and school informed if your current address changes, if you plan to transfer to another school, if your student status drops below half-time, if you quit school altogether, or if you change your name. Any and all of these changes can affect your loan, so it is your responsibility to make sure that you post your current information.
Most borrowers, in order not to make a bad credit student loan, will have several decisions to make about payment schedules. Since loan rates are low just now, don't pick the longest available time period – 25 years – because this will essentially void all the benefits of low interest rates. As a general rule of thumb, pick a time-line that will let you enjoy this benefit to its maximum.
Pre-payment on student loans doesn't usually carry a penalty; avoid a bad credit student loan by paying more than the required minimum amount, even if it stretches your budget a bit.
Many loans, including the Federal Stafford and loans through the Federal Direct Loan Program have a grace period of six months. The grace period usually begins after graduation. Dropping to part-time enrollment may incur the grace period. If you switch to less than full-time status, make sure you have all the information and confirm with your financial aid office all loan implications.
Other loans have no grace period. Such loans may require interest payments while in college, or payments “60 days after the final loan disbursement”.
There are two basic flexible plans, and both aim to prevent a bad credit student loan default or “cure” a delinquency.
- Graduated Repayment
- Income-Sensitive Repayment; though better than defaulting, this option may include interest-only payments. It goes into affect for five years, definitely a non-preferable option.