Student Loan Payoff Procedure

Student Loan Payoff Procedure

As soon as the student loan company learns you have graduated from a university your student loan will come into the repayment status. Generally the first month you are out of college you will be required to make a payment. Most student loans are set as a twenty year loan. The company totals up the interest, the years you will take to pay it off and then provides you with a monthly payoff amount.

Even when you have been with the same student loan company for your college years they consider each year or each semester to be a different loan. While you may make one payment your loans are not consolidated even within this one company. This is important, but we will get back to that later.

You can elect to set up automatic payments on a monthly basis for the repayment amount the company sends you. You can also send a check with your payment stud. Typically you are given a small interest rate deduction for automatic payments.

If you have federal student loans keep in mind that these loans provide a lower interest rate than your private loans. This is essential when it comes to consolidation. You will want to consolidate your loans.

Even if you are making one payment you could be charged interest on more than four loans. In fact one year you may have an interest rate of 6.8 percent, but the next year’s loan was at 7.1 percent. Federal loans do not consolidate private loans; however if you have more than one federal loan you may get these consolidated for one monthly payment and a lower interest rate.

You should keep your federal student loans separate from private loans. The reason for this is because of the extreme difference in interest. Most federal loans are lower than 3 percent. The average private student loan even with consolidation is 6 percent. You will never find a consolidation option with all loans combined than your federal loans.

You will still want to consolidate the private student loans. How this works is that any loans you have within the same company or with other companies will be placed into one loan. You will be given the going interest rate on your loans, and then you will have one monthly payment on the private loans. Keep in mind if you have private and federal loans you will still have two payments, but both loans are consolidated wisely.