By Nathan Treadwell
If you are an international student who requires a student loan to fund your studies, one of the most important things you need to be aware of is repayment. A loan is taking on a debt, and you will need to repay that loan. Repayment is a serious thing and should not be taken lightly. Luckily, there are a few things that you can do to help alleviate the burden of repaying your loans.
During the student loan application and approval process, you and the lender will agree on the repayment – the interest, the monthly payment amount and the length at which the loan is to be repaid. Keep in mind the total amount to be repaid will consist of the principal and interest. The principal portion of the loan is the amount of money that is loaned to you at the beginning of the loan and the interest is that loan amount multiplied by the interest rate over the life of the loan.
The repayment length may affect the overall amount of money repaid and the monthly payment. If the repayment term is shorter, then the monthly payment will be higher than for a loan with a longer term for the same amount. The overall money paid on interest may be lower and you will be free from the burden of debt sooner. Alternatively, if the term is longer, then the payment will be lower than for a loan with a shorter term for the same amount. However, you may end up paying more interest overall and thus more money, and have the burden of debt for a longer time frame.
You will need to determine with the lender whether there will be a grace period. Depending upon many factors, you may be able to withhold payment for up to six months after graduation. Additionally, there may be an option to pay interest-only or a reduced monthly payment while you’re still attending school.
It is very important to understand how the loan is structured and how the chosen repayment structure will affect future payments. It is possible that choosing a lower payment during school could result in the loan balance increasing as interest accrues while in school. Our advice is to be completely aware of what is expected in terms of repayment and how it affects the total loan balance throughout the duration of the loan term.
If you have a cosigner, the cosigner will be required to assume the debt if you’re unable to pay back the loan. Additionally, you should be aware of the specific policies of your lender and what the penalties may be for missing a payment or making a late payment.
Fortunately, there are options to alleviate the burden of debt and make payments easier. For instance, some international students explore refinancing their existing student loan debt. Depending on many factors, a lender may allow you to refinance your loan, sometimes at a lower rate, or for a different term length, to better help you pay off your loan.
Another potential option is consolidation. This process restructures separate loans into one loan balance that is repaid at a new total monthly rate.
Aside from refinancing and consolidation, there are other strategies that some international students execute, such as:
- If the lender allows it, you can make more than the monthly payment each month. This will lower the debt faster and allow the loan to be paid off sooner.
- Know the repayment plan and when the debt will be paid off – this end-date can be used as a goal to motivate you to pay off your loan sooner.
- If you find yourself with a large cash windfall (such as a bonus at work, lottery winnings, or an insurance claim), use a portion of that money towards paying off the student loan debt.
- If you receive a raise, put a portion of that amount every month towards paying off the student loan.
- It may make sense to avoid re-structuring the loan to pay it off over a longer term. While the monthly repayment amount may be lower, you may be in debt for a longer time and may end up paying more interest.
- Sign up for automatic payments – often there is an interest rate deduction involved.
- Rather than making a monthly payment, make the payment every two weeks. Split the monthly bill in half and pay every two weeks. This will result in one extra monthly payment a year.
- Be aware of any deduction options when filing taxes. It may be possible to reduce your taxes by taking a deduction. Please speak with a tax professional before exploring this further.
There are certainly additional strategies to help pay off student loans than those listed above, and you should do all you can to explore your options.
However, sometimes you may not be able to make a monthly payment. If this is the case, here are the steps you can follow:
- First, you should do everything to avoid missing a monthly payment. You may want to look at your finances and expenses and make cuts for things that are not essential. Examples include finding a roommate, cutting down on weekend expenses, eating out less often, etc.
- Secondly, it may make sense to find a second job. There are many jobs that can be done part time that can help you earn extra cash to put towards paying off the loan.
- If there is no other option to avoid missing a payment, you may be able to change your repayment plan with your lender. You should contact your lender right away to let them know that you cannot make a payment. The lender may have a program to help you and allow you to delay payment, however, it is not guaranteed nor should be counted on.
Ultimately, a good way for you to prepare for repaying your student loans is to be fully aware of what the repayment structure is, understand what is expected of you as a borrower from the lender and calculate how the loan payments fit in with your personal budget and expenses. With the right strategy, repayment can be managed and you can be on your way to being free from student loan debt.
Nomad Credit has helped numerous international students from several countries find student loan options. Nomad Credit can help international students search for the lenders that may lend to them. For example, Nomad Credit recently helped an international student pursuing an MS degree at Clemson University find a student loan option from an international lender.