Spring Break
Student loan payments should be well thought out
Jessica Leggin / Campus Editor
Issue date: 3/27/09 Section: News
With a weak economy and bleak job outlook, the thought of repaying loans upon graduation may seem daunting.
As of July 1, a new income-contingent plan allows students to pay their loan off by a fixed percentage of their income for a specified period of time, instead of paying upfront or paying at a fixed rate unrelated to income.
Although when it comes to loans, financial aid counselor Tina Leonard suggested the easiest payment plan, like the income-contingent, might not always be the best.
After graduation, students should consider their current and future status of well-being when choosing a loan payment plan.
Leonard said the income-contingent loan gives a student options if there are hardships going on in their life.
"With the economy being weak right now, a student might not get the job placement they want after graduation," she said. "(The income-contingent) should only be used when there is some type of hardship, and after it is over, then they should move over to the standard plan."
Students mostly use the standard repayment plan when it comes to paying off loans after graduation.
This plan is based off fixed monthly payments and allows one to pay off their loans within 10 years.
Leonard said a student should not only use the income-contingent payment plan.
"You don't want to stay stuck with this," she said. "Only use it as an option. You have the option to change plans as things change."
Leonard said in an income-contingent plan, students might recognize the small amount of money they have to pay off each month but not the extra interest they might accumulate.
"Students only see that $50 or so a month and don't realize they might only be paying off the interest, but not the principle," she said. "You are capitalizing interest."
The principle is the money borrowed.
Leonard said the income-contingent should be used temporarily.
"There will come a time when they want you to start paying toward the principle," she said.
Leonard said income-contingent plans have qualifications to abide by.
"You have to apply for this and have some proof of reasoning," she said. "Everything has to have some type of application process when it comes to getting any loan."
Leonard encouraged students to do their exit counseling online for loan payment options.
Exit counseling is mandatory for all students who are close to graduation and have received Federal Direct Stafford Loan funds.
This program allows students to map out how to pay off their loans after graduation.
"On online, a student can receive their personalized view of their loan history," she said. "It also gives you what your loan options are."
Repayment plan options for students also include extended, standard and graduate repayment plans, as well as income-contingent.
Leonard said overall loans do go away.
"You are making an investment in your future," she said. "It helps you to get to point A to point B."
Leonard said one has to understand the benefits they can gain and the investment they are making when obtaining a loan.
"An education just allows one to receive the advancement in employment opportunities."
Jessica Leggin can be reached at 581-7942 or at jmleggin@eiu.edu.
As of July 1, a new income-contingent plan allows students to pay their loan off by a fixed percentage of their income for a specified period of time, instead of paying upfront or paying at a fixed rate unrelated to income.
Although when it comes to loans, financial aid counselor Tina Leonard suggested the easiest payment plan, like the income-contingent, might not always be the best.
After graduation, students should consider their current and future status of well-being when choosing a loan payment plan.
Leonard said the income-contingent loan gives a student options if there are hardships going on in their life.
"With the economy being weak right now, a student might not get the job placement they want after graduation," she said. "(The income-contingent) should only be used when there is some type of hardship, and after it is over, then they should move over to the standard plan."
Students mostly use the standard repayment plan when it comes to paying off loans after graduation.
This plan is based off fixed monthly payments and allows one to pay off their loans within 10 years.
Leonard said a student should not only use the income-contingent payment plan.
"You don't want to stay stuck with this," she said. "Only use it as an option. You have the option to change plans as things change."
Leonard said in an income-contingent plan, students might recognize the small amount of money they have to pay off each month but not the extra interest they might accumulate.
"Students only see that $50 or so a month and don't realize they might only be paying off the interest, but not the principle," she said. "You are capitalizing interest."
The principle is the money borrowed.
Leonard said the income-contingent should be used temporarily.
"There will come a time when they want you to start paying toward the principle," she said.
Leonard said income-contingent plans have qualifications to abide by.
"You have to apply for this and have some proof of reasoning," she said. "Everything has to have some type of application process when it comes to getting any loan."
Leonard encouraged students to do their exit counseling online for loan payment options.
Exit counseling is mandatory for all students who are close to graduation and have received Federal Direct Stafford Loan funds.
This program allows students to map out how to pay off their loans after graduation.
"On online, a student can receive their personalized view of their loan history," she said. "It also gives you what your loan options are."
Repayment plan options for students also include extended, standard and graduate repayment plans, as well as income-contingent.
Leonard said overall loans do go away.
"You are making an investment in your future," she said. "It helps you to get to point A to point B."
Leonard said one has to understand the benefits they can gain and the investment they are making when obtaining a loan.
"An education just allows one to receive the advancement in employment opportunities."
Jessica Leggin can be reached at 581-7942 or at jmleggin@eiu.edu.
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