Understanding Student Loans

"I'm about to graduate, and I have no idea how much I owe in college loans!" Sure, you go through the exit survey with your loan provider, but do you really understand how student loans work and when you're supposed to pay them back? I know I didn't when I graduated years ago.
Hopefully this article might guide you through the process.
1. How do I know how much I owe?

• Financial Aid Office: If you have access to a financial aid officer at your institution, this is probably the easiest route. They can let you know the amount you will own on each loan and who your lenders are.
• http://www.nslds.ed.gov/nslds_SA/: If you have federal loans, you can use your FAFSA pin to find out how much you owe on any stafford or perkins loans (see next question for a description of loans).

2. What types of loans might I have?

• Federal Subsidized Stafford Loans: Federal government loans that you do not have to pay interest or any prinicipal (total borrowed) on during grace periods.
• Federal Unsubsidized Stafford Loans: Pretty much the same as a subsidized stafford loan, except you do pay interest on the loan during any grace periods.
• Federal Perkins Loan: This is a low interest (5%) loan for undergraduate and graduate students with “exceptional” financial need. They are similar to subsidized stafford loans because they do not charge interest during grace periods and their grace period is a bit longer than the typical six months.
• Private Loans: Many students who have maxed out their federal loans apply for loans through private vendors.

3. When do I begin paying back?

• You might not have to!: There are a number of loan forgiveness programs offered to students who pursue work in specified fields. For example, if you teach in an elementary school that works with under-served populations, you might be eligible for loan forgiveness. To view all of the loan forgiveness opportunities, check out this great, reliable web site: http://www.finaid.org/loans/forgiveness.phtml
• Grace Period: Unless you've consolidated before graduation, you will typically have a six-month grace period where you won't have to make any payments on your loans. Many people use this time to travel or they start paying on the principal of their loans to reduce payments!
• Deferment: If you find yourself in a situation where you can't pay back your loans due to economic hardships or other unforseen circumstances, contact your lender asap. You may be able to defer payments or extend the length of your loan to reduce your monthly payments.

Finally, there are ways to consolidate loans so that you only have one payment to worry about. However, there are both benefits and drawbacks with loan consolidation. I would highly suggest you read through J.D.'s article about repaying student loans on his 'Get Rich Slowly' blog (my all-time favorite): http://www.getrichslowly.org/blog/2007/11/03/a-rough-guide-to-repaying-student-loans/

Good luck!