Repayment of student loan
Student loans are financial aid given to students who would like to pursue their higher studies, and for the same require some financial help. These kinds of loans are given by the government which are also called as federal loans, or given by the private banks or any other financial institution, or by the school or university in which the student likes to pursue his higher studies.
Every loan provider has his own set of rules, which are governed by the national credit bureau. The borrower who is generally the student or at times the parent/guardian of the student must agree to the rules abide by the loan provider, and pay back the amount of loan taken as per the agreement.
If the loan is given to the student then there is grace period given to the borrower. The loan amount in this case is less but the borrower can start repaying back after 6 months or 9months of completing his studies for which he has taken the loan. This grace period can be used by the borrower to pick up a suitable job settle down, and then start repaying back the loan.
At times the loan is given to the parents. This kind of loan is generally called as PLUS (parent loan for undergraduate students). Here the loan limit is comparatively high with a lower rate of interest. But the repayment responsibility is completely on the parent. He is the borrower of the loan and he will be repaying the loan. So there is no grace period given in this case. Within 60days of disbursement of the loan the repayment should start as promised.
The kind of repayment strictly depends on the loan provider. The amount of loan taken and the number of years required to repay the loan, will determine the rate of interest and the amount for each EMI. But these are the various kinds of repayment options a loan provider can give to you.
Standard repayment option: this is the most opted student loan, where the borrower has to pay back the loan within 10yrs. The interest paid will be a little less because the monthly instalment amount is high.
Graduated payment: in this kind of scheme, the monthly instalment will gradually increase. The amount paid in the first month of repayment will be comparatively less, and the amount gradually increases.
Extended repayment plan: in this plan the borrower can opt to pay back the loan within 25yrs. Here the total amount paid will be a little higher because the rate of the loan is spread for a longer duration.
A borrower can combine graduated repayment option with extended repayment option and repay back the loan.
Income based repayment option: this is most suitable for borrower who does not have a fixed or stable income. There are repayment options which are income sensitive or income contingent.
In spite of taking a loan from the lender and taking the most comfortable repayment option, there may be at times a problem in repaying back the loan as expected. In such cases a borrower can switch from one plan to another plan, though it is not a good idea to frequently switch from one plan to another plan.
Another good option is to consolidate a loan consolidation means combining all kinds of student loans into one. This not only reduces the amount paid as interest but also makes the repayment options much easier. But the borrower can consolidate only once, and this option must be used by the borrower only if he is seriously behind in paying back the loan, as promised.
No matter what the borrower has to repay back the loan and cannot in any way escape it. Whether the loan provider is the federal government, or private lender, or any of the universities from whom you wish to graduate, the loan is a real loan and it not paid back as promised the consequences can be very serious.
These are some of the actions that can be taken when a loan is not paid back as promised.
a) National credit bureau will be notified.
b) The borrower will be ineligible for any other federation.
c) Loan payment can be deducted from the salary cheque.
d) Even after all the notices sent if the borrower does not respond the borrower can be sued.
So the student loan can play a very important role in a borrower\'s life as it can help him study without any financial worries. This loan not only helps the borrower pursue his higher studies but help other also to think about their higher studies without any financial worries.