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Check Out Options on Repaying Student Loans

By Sherrie Farabee
Black College Wire

Jinger Speights, a graphic design student at Florida A&M University, is looking forward to graduation, but not to the day her student loan payments begin.

As graduation day nears, Speights is beginning to think about those years of monthly payments.

"I know I'm going to get a good job and be able to pay it back," said the 22-year-old from St. Petersburg, Fla. "It just that, not having a job right now, it looks a little bleak."

As of the 1999-2000 school year, 60 percent of undergraduates at public four-year institutions had student loans, according to a report by Sallie Mae http://www.salliemae.com , the nation's largest provider of student loans. The loans averaged $16,000. The numbers were even higher for graduate students.

Students who take out loans have to pay them back at agreed-upon terms, according to The Student Guide, a handbook available from many student financial aid offices. Loans must be paid back even if students don't get jobs or don't complete their educations.

"A student can expect a letter from the Department of Education within a few months of graduation," said Cornelius Ann Floyd, student loan coordinator/default manager for FAMU.

One of Floyd's responsibilities is to advise graduates on their loan situations.

"The Department of Education will send you information that includes the interest rate, what your total loans have been and the date that you are being asked for your first payment," Floyd said. "They also ask you to choose a repayment plan."

According to Floyd, students have four repayment options. The standard plan requires paying at least $50 a month for 10 years. The extended plan allows repayment over a span of 30 years. The graduated plan starts at one payment level and increases every two years. The income-contingency option is a 25-year plan, with payments based on the borrower's income.

According to Floyd, this allows students who are just starting out to structure payments more to their advantage, but it's best to go ahead and pay off the loan. Students pay more in interest on extended loans. A student paying $10,000 in loans and $4,000 in interest on the standard plan would have lower monthly payments but higher interest, about $7,000, on the extended plan.

For students with $10,000 or more in loans, there is also a fifth option, consolidation, combining several loans into one. This is done through loan agencies and not through the school, but it can, according to Floyd, help students get lower interest rates on their loans.

Different loans have different terms, requirements and repayment schedules. Floyd insists it is important that students read the fine print and understand the terms of their loans and payment options. For more information: http://www.salliemae.com/manage/getstarted.html

Sherrie Farabee is a student at Florida A&M University who writes for The Famuan. She can be reached at [email protected].

Posted April 22, 2003