Jinger Speights, a graphic design student, is looking forward to graduation, but she is not looking forward to the day her student loan payments begin.
As graduation day nears, Speights is beginning to think about the monthly payments she will make for years to come.
“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.”
According to a report by Sallie Mae, a company that manages student loans, 60 percent of undergraduates at public four-year institutions had student loans as of the 1999-2000 school year. These loans averaged $16,000. Numbers are 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 the FAMU Office of Student Financial Aid. 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 the loan off. 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.
Sherrie Farabee can be reached at firstname.lastname@example.org.