Capitalization is the point at which all of the unpaid interest that has accrued on the principal is added to the principal. How much extra the capitalization of interest will cost you over the life of your loan depends on the specific type of loan and the terms of your loan’s contract. If your loan is unsubsidized, your loan will begin to accrue interest while you are in school even if you can defer payments during this time. The capitalization of interest begins as soon as your loan terms no longer allow deferment of interest on your loan.

Can I pay more than my monthly payment on my student loan?

Yes, there is no penalty for making an overpayment. The extra amount will be applied to your principle.

How much am I spending?

Create a budget - An itemization of your income vs. living expenses may help you budget better and plan for future expenses.

How much do I need for emergencies?

It is prudent planning to have at least three to six months of liquid/cash assets set aside in the event of a loss of job, medical emergency, short-term disability, etc.

Should I live on or off campus?

Before deciding on room and board options when attending college, it may help to itemize and project expenses. These expenses will vary depending on whether you will commute from home, stay on campus or rent an apartment off campus.

Should I rent vs. buy a home?

With interest rates near forty year lows, the decision to rent versus buy becomes difficult.

Will I be able to pay back my student loans?

There are several repayment options for students to repay their loans. Choose an option that is adequate for your need and income when the time comes to payback your loans. Repayments options can be reviewed at: www.studentloans.gov

How long will it take to pay off my loans?

Longevity will depend on the type of repayment option a student may choose and their income level. Some students choose term of 25 years and others prefer a shorter term of 10 years. This will depend on the student.

What would my loan payments be?

The loan amount, the interest rate, and the term of the loan can have a dramatic effect on the total amount you will eventually pay on a loan. The student should speak with their loan servicer to determine their interest rate and monthly payments.

What is the impact on making extra payments on a loan?

Over the course of a loan amortization you will spend hundreds, thousands, and maybe even hundreds of thousands in interest. By making a small additional monthly payment toward principal, you can greatly accelerate the term of the loan and, thereby, realize tremendous savings in interest payments.

How long will it take me to pay off my credit cards?

Paying only monthly payments will not pay off your credit cards sooner. The fact that 'interest never sleeps' means that the situation will continue to worsen because most of your monthly payments are applied to interest not principle. Additional monthly payments can make a difference to accelerate the payoff and save you hundreds and thousands in interest payments.

Do I have to accept the full amount of my loan?

A student does not have to accept the full loan amount awarded by the financial aid office. By not accepting the full amount will decrease your loan principle.

If I do not pay interest on my student loan while in college, how does this affect my loan?

Unpaid interest is compound, meaning it is added to your principle amount, therefore increasing your student.

What are fixed expenses?

Fixed expenses are set amounts that must be paid on a regular basis such as rent, utilities, medical insurance, food, clothing, etc.

What is my Net Pay?

Net Pay is your current income after all of the taxes and other withholdings have been taken from the gross amount.

What is reported and obtained on my credit report?

Credit reports contain information about current credit accounts and loans as well as past accounts that are now closed. The information may exist of car loans, checking account unpaid charges, medical bills, cell phones accounts, etc.

Goals should only be made for large, long-term plans such as homeownership, college tuition, or retirement.

FALSE – setting short-term goals builds upon your long-term goals, making your future goals achievable.

Should I buy or lease my first car?

That depends on where you are going to use the car and how much you plan to travel. Leasing is beneficial if you like to have a new car every three years and you do not put a lot of miles on it. Leasing companies restrict the amount of "wear and tear" and the mileage (annual amount; usually fewer than 12,000 miles) on the car. If you do decide to lease, ask a lot of questions and understand all of the fees.

Should I buy a home or rent an apartment?

Renting offers you increased flexibility in your living situation, which can be beneficial if you plan to change careers, which statically a person may change careers at least twice within the first two years of employment. Buying your home - the interest you pay can be deducted from your taxes along with the amount you pay for property taxes. However, it depends on your income vs. expenses and can I afford to buy at this point in my career.

Where can I locate all my student loans and servicers?

The National Student Loan Data System (NSDLS) contains all Federal Loans.

Why borrow Federal Loans verse Private Loans?

Federal loans are cheaper and typically have better repayment terms than Private Loans. Usually the interest is less than Private loan.

Can Private Loans be consolidated into the Direct Loan Program?

Private education loans can’t be consolidated into the Direct Loan Program, nor can they be eligible for the PSLF (Public Service Loan Forgiveness) Program.

Why seek debt consolidation?

Under programs such as the Federal Direct Consolidation Loan, you can merge several federal loans into one large loan. Doing this allows you to write one check or debit per month. Usually lowering your current interest rate; producing lower monthly payments, but increasing the repayment term. When you extend the loan, you are lengthening the time to pay it off, meaning you will pay more in interest.

If I default on my student loans what is the affect?

Defaulting on your student loan is the worst thing a student can do. The results could be wages garnished and the federal government will revoke your license and withhold your tax return.

Can I pay my accrued interest before consolidation?

Yes, paying the accrued interest before consolidation will minimize your principle balance. You must contact your lender.

Once the student reaches 26 years of age, can the student remain on parents Insurance?

Unfortunately, the student will automatically be removed from their parents’ insurance once they reach 26 years of age.

If I can’t pay my Student Loans due to financial hardship, who do I contact?

Please contact your lender and apply for a deferment or forbearance on the basis of financial hardship. There will be an application the student must complete and approved by the lender.

Frequently Asked Questions

Answers

What is “Capitalization of Interest”?