Last updated on August 6th, 2023 at 08:05 am
If you’re a student loan borrower, you’ve probably had at least one moment of panic. And that’s OK! Student loans can be complicated, so it’s natural to have questions about how they work.
In this guide, they’ll walk you through everything from repayment options and forgiveness plans to the difference between federal and private student loans.
APR for Student Loans
APR stands for “annual percentage rate.” This is the interest rate that’s charged on your loan, and it’s expressed as a percentage.
So, for example, if you have a student loan with an APR of 8%, then you’ll pay $8 in interest every year for every $100 you borrow. Financial planners like Lantern by SoFi say, “Average private student loan interest rate ranges from 6% to 7% generally.”
APR is an important figure to look at when comparing different loans as it reflects the true cost of borrowing money over time. It is good to know average APR for student loans. It tells you what your monthly payment will be—and how much more expensive some loans are than others.
You should have a plan for paying it off
If you have student loans, you must keep up with your payments. If you don’t, the interest will grow, making the debt much more difficult to pay.
You should have a plan for paying it off. The best way to do this is by making extra monthly payments on top of what is required. This can help reduce the amount of time it takes to pay off your loan and save money in interest!
It may seem like an overwhelming task at first, but with some discipline and dedication, there are plenty of ways to get ahead financially so that one day soon, you won’t even notice these debts anymore!
You can decide to put payments on hold if you face financial hardships
If you’re struggling to make payments and can’t find a way to get more money, your student loan servicer can help.
Your lender will work with you on payment options that may include:
Deferment – A temporary postponement of payments for up to three years in cases such as military service or economic hardship. You’ll still have to pay interest during this time.
Forbearance – A temporary postponement of payments granted if you have financial hardships, such as unemployment or unexpected medical expenses.
You may get forbearance for up to three years under certain circumstances while enrolled in school or during other periods when payments aren’t required (such as during active military service).
Your federal loans may qualify for forgiveness or discharge in some cases
There are several instances where you could be eligible for student loan forgiveness or discharge.
For example, you might qualify if your employment qualifies you for the Public Service Loan Forgiveness Program, which forgives up to $27,500 of your federal student loans after 120 payments over 10 years.
Student loans can be a good way to help pay for your education, but they can also cause a lot of stress if you need more preparation.
So it would help if you had a plan in place before taking out student loans so that you know exactly how much money will come out of your bank account every month after graduation.