Student Loan Terms Part Two (Financially Free Friday #3)

Alas, we meet again friends! Here we are to discuss the fun phrases we didn’t get around to last time. I can tell that you are pretty gosh darn excited about it too. Well, come on down!

Grace Period: The beautiful, carefree window of time allowed before you officially have to make your first payment. Generally speaking, it usually starts the day after you graduate, leave school, or if you drop below half-time enrollment. It varies between six to nine months.

Interest: A percentage of the unpaid principal balance is calculated and added on to your loan. Basically, the cost of borrowing the money for school. You may have either fixed or variable interest. Fixed means the interest rate will remain the same, while variable interest may change over time.

Loan Fee: For each federal loan you receive, you are charged a fee based on a percentage of the amount you borrow. It is then deducted from your disbursement, reducing the amount you actually receive.

Promissory Note: The contract between you and the lender, laying out all terms and conditions of the loan. This states your rights and responsibilities as a lender, as well as the amount to be paid back and in what length of time.

Repayment Period: That time in your life where a little piece of you dies inside every time you give some of your paycheck to your lenders. Oh, wait. I mean, the maximum amount of time allowed to pay back the loan. This can range from 10 to 30 years.

Subsidized: A type of federal loan in which the borrower does not pay interest during the following times: while in school, during a grace period, or while the loan is in deferment.

Unsubsidized: No matter the status of the loan, the borrower is responsible for the interest that begins accruing on the disbursement date. However, no payments need to be made until after graduation.

There you have it. Easy enough right? I hope you learned a little, or perhaps a lot, in the process. It can seem impossible to decipher student loans but the secret to unraveling the mystery is knowledge. If you’re like me and have already made the mistake of getting into student loan debt, it is fixable. However, if you are heading towards college and looking for the best way to go about it, be sure to do your research. None of us knows everything and a little guidance from the people who have been there could end up saving you in the long run.

Have a beautiful weekend!

Sources:

http://www.usnews.com/education/blogs/student-loan-ranger/2014/06/04/11-terms-you-need-to-know-before-repaying-student-loans

https://studentloans.gov/myDirectLoan/glossary.action

http://www.ocm.com/blog/college-loans-101-types-of-student-loans/

 

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