Senior Steps: Paying our bills

Kelly Eastland

The good news is you’re graduating; the bad news is that your loans are due! Thinking back to my own senior year, I was very nervous about how I would be able to pay off my school loans.

In the back of my mind, I always knew that I had this commitment, but I never took the time to worry about it.

Quite frankly, it was something I could just let my parents take care of. As graduation approached and I prepared to finance my potential graduate school education, I began to panic! How in the world was I going to repay my school loans? I had no clue about starting salaries, creating a budget or even when my loan payments were due. Managing your debt can be intimidating (especially if you don’t have a job yet), but don’t stress too much. Following these simple guidelines will hopefully help ease some of your concerns.

Don’t panic, but take it seriously:

No one wants to spend a Saturday afternoon going through your promissory notes and loan paperwork that you’ve collected over the past four years. Some of you may be thinking, promissory note, what’s that? (The promissory note is the contract between the borrower and lender that states the terms and conditions of the loan.) Regardless, you need to understand how much you owe, who you owe it to and when your payments begin.

Enjoy your grace period:You’ll have time after graduation to prepare for repayment. Generally, students receive a grace period of at least six months before you have to begin making monthly payments. During this time, interest does not accrue. This will give you time to find a job, create a budget and organize your life before you have to begin your payments.

Educate yourself:

Take advantage of free workshops. For instance, the Financial Assistance Office is hosting a debt management seminar for seniors on April 23 in the Connelly CenterCinema. You can also find helpful information online at the Financial Assistance Office homepage.

In addition, the National Student Loan Data System is the United States Department of Education’s central database system that tracks student aid. If you have a loan, you’ll be in the database. Check your personal history at Most of all, if you have questions, contact your loan provider.

Know the terms:

Probably the most intimidating part of understanding your loans is understanding the vocabulary!.There are probably many terms in your loan agreements that are confusing. Here are a few that you should know …

Lender – the holder of the loan; could be a bank or school

Servicer – the organization that is responsible for computing interest and mailing billing statements

Principal balance – the dollar value of the declining balance due on a loan, including capitalized interest

Maturity dat – the date on which you must begin repaying your loan

Subsidized loan – the federal government pays the interest that accrues on subsidized loans during an in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods if the loan meets certain eligibility requirements.

Unsubsidized loan – the borrower is responsible for paying the interest on an unsubsidized loan during in-school, grace and deferment periods, and to repayment periods.

Keep your options open:

There are a number of payment options available to you. If you find that you are having trouble making the monthly payment, there are ways to lower your payment. Generally, people make more money as they continue to work. Find a payment plan that works for you. You may choose a standard repayment option where you pay a set amount for the principal and interest each month. Most providers offer a graduated repayment option in which you begin paying a lower amount and each year, the monthly payment increases as your salary increases. The income sensitive plan is based on a percentage of the borrower’s monthly income. Choose the plan that works best for you.

If you have multiple loans either at the same or different interest rates, you may choose to consolidate your loans into one. Loan consolidation is a federal program that allows borrowers to combine the balances of their loans in order to extend the payment period and lower the interest rate.

The interest rate is fixed for the life of the loan and there is usually no penalty for early repayment. Remember, there are also tax benefits for school loans, so as long as you are paying the loans, you can deduct the interest.

Prepay when possible. You can always put a bonus or a part of your tax refund toward your school loans. Prepaying the loan will reduce the balance of the loan and you’ll pay less interest in the long run.

Speaking from personal experience, don’t be intimidated by your debt. Just relax and you’ll be fine.