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If all of your students loans, including consolidation loans, were first disbursed on or after July 1, 1993, you are entitled to an option of repayment plans: income-sensitive, graduated, or standard repayment plan.

If you have loans first disbursed prior to July 1, 1993, your lender may (but is not required to) offer alternate repayment options. Check with your lender or servicer to see what repayment options they may offer.

Monthly payments are equal throughout the life of the loan. Interest costs are

lower due to the fixed payments.

Graduated Repayment

Initial monthly payments are lower and gradually increase over the life of the loan. Payments may begin with interest-only payments and gradually increased principal payments. At minimum, monthly payments must equal the interest accruing each month. Total interest costs will be higher than a standard repayment plan over the minimal principal reduction with the initial lower payments.

Your monthly payments are tied to your income and increase along with earnings. Your lender will require annual certification of your income. If the certification is not provided, your lender may exercise its right to convert your loan(s) to a Standard Repayment Plan. A lender is only required to offer the repayment options to qualified borrowers once – generally, when they enter repayment after expiring their grace period.

Total interest costs may be greater than those associated with Graduated or Standard Repayment Plan due to minimal principal reduction with initial payments.

To get an idea of what your expenses might look like, a sample budget worksheet is included in this booklet. The worksheet will help you to estimate your future income and expenses. The exercise will give an idea of how to manage expenses. It is better to overestimate your expenses and underestimate your income than vice-versa. An undergraduate student should plan to budget about 8% of the first year’s gross income on student loan payments. A graduate student should plan to budget 15% of the first year’s gross income on student loan payments.

A few important terms you should familiarize yourself with are:

Grace Period: A period of time during which a borrower incurs no loss or penalty for postponing a loan payment.

Deferment: A process in which you are allowed to postpone payment of the principal and/or interest on a student loan after the beginning of the repayment period. Check promissory notes for specific deferment information on each loan.

Forbearance: A special arrangement made for financial hardship. It is not a right. The lender has the option to permit a borrower to postpone principal and interest payments. The borrower is still charged interest. The lender can require the interest be paid when due, allow interest charges to be capitalized, or permit you to make smaller payments for a specified period of time. If you have problems making a payment, contact the lender immediately.

These tips can help you erase the tab you ran up during your college days.

You may find that the real education starts after graduation. Following a logical fiscal plan will keep you from paying for some costly lessons in the future. In order to qualify for an educational loan, you were profiled as a winner. Continue your winning style by repaying your loan on time! Congratulations and good luck!