Choosing a Longer Payback Period
Choosing a longer payback period for your student loans just good business if you're a freshly-graduated college student these days. The reality for most students is that unless you drop into that dream job right off the bat, a longer payback period just makes sense. Especially if you've decided to follow your heart and get a degree in a field that can be very hard to get into. While following your heart is never a bad thing, the reality is that some professions are more likely to give you a financial windfall than others. That said, if you continue your schooling after getting that bachelor's degree, six figures of loan debt will more than likely follow. As long as you remember college is an important investment and understand the relationship between debt consolidation and future plans, you'll be able to take it in stride.
But what happens after you're done? You have the degree (or maybe multiple ones, if you went to grad school), you've earned praise from your teachers and family. Now what? The job market can be very tough to break into and there's a good chance you'll begin your post-college life living in a corner suite at the Family Hotel. When you're trying to find work, the last thing you need to worry about is the student loans. But inevitably, they'll come calling and have to be dealt with. The first invoice you get from your lender can be quite a shock. Now, there are ways to deal with the reality of student loans. The first option is to defer or claim financial forbearance. While this will result in the interest clock continuing to tick, it allows you to give yourself some time before the first payments are due. Another option is to lengthen the payback period.
Reasons To Extend The Payback Period
While the idea of lengthening the payback period can be scary for some, for most it's a way to gradually deal with the financial realities of post-college life. The main advantage is to lower the monthly payment. Sure you have to stretch it out over more years (anywhere from 20 to 30 years), but most people who extend their payback period aren't thinking of the accrued interest. They're just trying to look at things from a month to month basis. That said, extending the payback period doesn't mean you can't make larger monthly payments, it just means that your required amount will be lower. You can do what other people do - save up money, and add on a lump sum every six months to get the costs down. That's one way to work around the sticker shock and be able to stay in the good graces of your lender.
As you can see, there are a few reasons to extend the payback period of your loan. If you're having trouble paying that high amount every month, all lenders have consolidation options open to you. Yes, it still accrues interest (and in some cases, makes it higher), but to those people who are only looking at things on a monthly basis, it's a great option. Plus, if your job situation improves, you can always pay a higher monthly amount or pay an extra lump sum every few months. With that in mind, it's no surprise why people would extend their payback period. After all, it's kind of hard to look at your finances 20 or 30 years into the future when you're struggling on a monthly basis. Take the time to talk to your lender. Odds are good the two sides can come up with a better payment option for you. It's worth the time, believe us.
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