December 4, 2009, Newsletter Issue #108: I Have a Degree in "Student Loans"

Tip of the Week

Graduating from a college or university is one of the single greatest accomplishments any one person can achieve. All of the late night studying, the group projects, finals and term papers have finally paid off ...and by the way, you have just inherited thousands of dollars in student loans.

If you did not receive a full, or partial scholarship to go to school, you are probably very familiar with the Stafford Loan. The Stafford Loan is the most common type of student loan. These loans are divided into two categories, subsidizes and unsubsidized. The subsidized Stafford Loan is a loan in which the federal government pays the interest while you are in school. If you have an unsubsidized loan, you are paying the interest while you are in school.

Assuming you stayed in school the entire four years (or more), your first student loan payment will be due within six months after your graduation. This is a sobering realization for a lot of college graduates. Unfortunately, a lot of colleges and universities don't equip our students with the basic money management skills to survive after graduation.

If you are in a situation where you are unable to make your student loan payments due to unemployment or financial hardship, you may qualify for a Deferment or Forbearance. If you qualify for a deferment, you will not be required to make principal payments on your loan during that period. Interest payments are still due, but if you have a subsidized Stafford Loan, the government will make the interest payments for you.

If you don't qualify for a deferment, you may qualify for a forbearance. A forbearance, is a special agreement with your lender that allows you to reduce or postpone principal payments temporarily. Interest continues to accrue during this period on subsidized and unsubsidized Stafford Loans, and if you don't pay anything during the forbearance it will be added to the back end of the loan. If you feel that either of these options may be for you, contact your lender to determine if you qualify.

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