✨✨Why It Is Important to Understand Student Loan Interest Rates
Some student loan interest rates are high and some are low. Understanding student loan interest rates starts with knowing contracted rates. How many students read the promissory note after graduation?
Most don’t, and that is where problems begin. It is also good to research student loan problems before deciding to go to school on large student loans. Find out why keeping student loans small is important.
Understanding a promissory note allows students to understand the exact terms of their student loans. That is important when it comes to paying off student loans quickly. Many students complain the terms were not clear, because they did not read the fine print. These are the students who fell far behind in payments or increased their balance. Some even went into paycheck garnishment.
✨✨It Doesn’t Matter if Student Loans Have a High or Low-Interest Rate
It doesn’t matter if student loan interest rates are high or low, a loan can be re-amortized for a faster payoff. Re-amortization is when a graduate adds an extra payment to the principal every month. This cuts down on future interest to pay, so the loan is paid off faster than quoted.
What happens, is many graduates apply for deferrals to skip payments for a while and are shocked at the increase in the loan balance. In most cases, interest is added to the balance, it cannot be deferred. This is what makes the balance balloon. Even if the deferral is legal, the interest is still added to the balance.
During the student loan grace period, (a legal non-payment period allowed after graduation), the interest does not accumulate.
Student loans are predatory because interest accumulates during most deferrals. But, they are also predatory because when a student goes into default, their paycheck can be garnished. With a garnished paycheck comes bad credit, no apartment, and no car; and many employers will not hire someone with bad credit.
Research Student Loan Problems Before Applying to College
✨✨What Happens With a Student Loan Payment Pause
It depends on the student loan payment pause. If a pause happens during a return to a graduate program, medical residency, or government-permitted pause, interest accumulates. So, during these times if a loan recipient doesn’t work to pay the interest, the student loan balance can increase exponentially.
Balance accumulation is the reason to read the fine print and find a way to pay the interest when a student loan is deferred. The only reason to defer and not pay interest is that there is absolutely no income available. Sacrifice is in order, find a way to pay the minimum payment, which would be the interest.
Student loans are predatory because, unlike most business loans a graduate can’t file bankruptcy on them. Bankruptcy can be filed in extremely rare cases, and it cost a lot of money to hire a bankruptcy attorney. Most student loans do not allow for hardship either. So, the only option is to pay off the loans.
Understand the Dangers of Balance Increases With Student Loan Deferrals
✨✨Properly Take Advantage of the Student Loans Grace Period
Use the grace period to get ahead by organizing finances and affordable living arrangements. Know the monthly payment amount of the loan and get a job to support it. If necessary, get two jobs. During the student loans grace period create a living budget to support loan payments. Understand that missed payments or deferrals can result in bad credit as loan balance balloons.
For living arrangements, ask parents to allow a rental agreement that will enable you to support your loans. If parents aren’t available, ask another relative or find a modest place to live.
Re-amortize the loan from 15 years to 7 years by paying extra to the principal each month. Make it crystal clear to the loan servicer that extra payment goes to the principal. Then verify on your balance each month that the extra payment went to the principal.
Aggressive job hunting for the highest-paying job possible should be done during the student loans grace period. Know what fields will support a specific student loan payment easily before your choose.
Re-setting the amortization of a student loan is how it is paid off quickly. The higher the interest rate on a student loan the more that will be shaved from the balance with extra payments.
✨✨Be an Advocate for College Without Student Loans
Now that it is clear that student loans are predatory. It is important to read the fine print on all promissory notes and pay off student loans early with extra payment to the principal. Use an amortization calculator.
Anyone can pay off student loans early when student loan interest rates are understood. The interest rates can snowball a balance when loans are deferred. On the other hand, paying extra to the principal will decrease a loan balance over time and decrease the years of payment.
Take advantage of the student loans grace period to organize living situations, organize finances, and get the best job possible.
A student loan payment pause is serious, it can balloon a balance beyond any imagination. Make paying off loans a priority, and make the sacrifice.
In light of the fact that student loans are predatory and can potentially ruin finances for a long time, spread the word that students can minimize loans.
Decrease loans by starting at a community college, then on to a public college. Look at the trades, if a student is interested in trades, the loans are minimal and some pay very well.
Scholarships are king. If parents are not able to pay for college, apply for every scholarship that is offered. Ask relatives with high incomes to help with financing college.
Let friends know that student loans are no joke. Take them seriously before applying, and understand the dangers.