6 Confusing Student Loan Terms Explained
College is fun. From new and exciting life experiences and lifelong memories to friendships and growth in knowledge, it is a priceless time in life. But after you graduate, there is part of college that stays with you that you may wish away – that is your student loans. And they can be confusing when you start to look at all of the terms that come along with them. Below is a rundown of these terms that may seem like a new foreign language to you.
Acceleration is termed as the demand for you to pay back your current outstanding loan debt. Acceleration may sound scary but it only occurs in certain cases, such as if your loan application included false statements or you used your loan money to pay for something that is not related to your education.
Capitalization, also known as capitalized interest, is interest that has not been paid and is added to your loan’s principal balance (the amount you originally borrowed).
Forbearance is the deferment of loan payments that can be used to temporarily stop making loan payments or reduce monthly payment amounts. This may be used when you need a little time to get your finances together.
The grace period is a period of time that lasts from the time you leave school until the time you actually have to start making payments on your loan. Grace periods typically last about six to nine months.
Income-driven Repayment Plan (IDR)
The term income-driven repayment plan may not be so hard to figure out but we want to cover the different types available to you so you can better understand which options are available to you. Several types of IDRs are available, which are calculated on your yearly salary:
• Pay as You Earn Repayment Plan (PAYE)
• Revised Pay as You Earn Repayment Plan (REPAYE)
• Income-Based Repayment Plan (IBR)
• Income-Contingent Repayment Plan (ICR Plan)
Loan forgiveness occurs when you are not obligated to repay student loans that are outstanding.
It only applies to specific situations, such as if your school is closed while you are still a student or your job qualifies you for loan forgiveness (including public service or military jobs).
For help with Student Loan Debt, contact us today.