Student loans are an unfortunate reality because it puts graduates immediately in a negative net worth situation. However, more important than those loans is the education, career skills and marketability of the education that these loans facilitate. For students have taken out student loans, there is a “grace period,” but once that period ends, it is time to start making student loan payments.
Trouble Making Student Loan Payments?
Given the economic cycles that our country rolls through every few years, there are times when it simply be impossible to find employment. This means that paying student loans on your file will need to get put on hold. However, the last thing you will want to do is default, so tending to the task of dealing with these loans is something you should do sooner rather than later.
With Federal Student Loans, there are many options that you have to defer making those payments. It does not mean that you will never be making a payment, but under some circumstances you can qualify for a couple of different options.
Deferment is one option that is available to students who are having trouble making their student loans payments. What this option does is allow you to postpone making those payments for a specified amount of time. Unemployment and hardship qualify under this program. In some situations, you will have to make interest-only payments to the loan or you can capitalize that interest (add it to what you already owe) in other cases.
Forbearance is another option that you can pursue if you are having financial problems, and it allows the to postpone your payment for periods of up to 12 months to a maximum of a 3 years in total over the life of the loan. This option is available through your lender (so start there). During this period, interest accrues for the periods of forbearance. It is important to notice that you have to continue making payments until your lender approves your application for forebearance.
Benefits of Making Student Loan Payments
While students loans are a big burden for many graduates, there is actually a big plus to them as well; they establish credit-worthiness and establish a capacity to repay debt. This is particularly true for students who are looking to convince a lender that they are worthy of a mortgage once they graduate and get their first real job.
As well, whether it is obvious at the time or not, making student loan payments also instills value in proper budgeting and cash management, something that a lot of people have trouble with (but do not realize it until it is too late).
So while student loans may seem like a terrible evil, particularly at times when making those payments is difficult or impossible, or at times when the cash resources could be better used elsewhere, there are some decent personal-finance benefits that come with that territory.