Student Loan Repayment: A Vocabulary Lessonby Anya Kamenetz
Studies show that only one in five student borrowers make all of their monthly payments on time in the first three years of repayment. Yes, that loan can sneak up on you after that six-month grace period.
Good Standing: This has nothing to do with posture. It means being up to date with repayment. The best way to do this is to set up an automatic direct debit on the due date each month, from your bank account to the student loan company or companies. Direct debiting might even net you an interest rate discount of a quarter point to a full percentage point.
Borrowers in good standing also keep in touch with their lenders, letting them know if they move or change contact information. You should put as much of your correspondence in writing as possible and save copies of it. If you're late with a payment, call up the lender and say, "It's important to me to remain in good standing. Can I send you a good-faith payment (of at least $50) now?" Then ask what repayment options you might have.
Deferment: This is a period in which you don't have to repay your loans. While enrolled in any school at least part time, you'll automatically get an in-school deferment, plus six months' grace period after you leave. Military service brings automatic deferment, too. Otherwise, if you're broke and need a break, you must apply in writing to your lender. You can get a deferment for up to three years at the lender's discretion if you can supply evidence of unemployment, low income, and/or financial responsibilities such as children. The good news is, if you get an official deferment on a subsidized (Stafford) loan, the government picks up the interest on the unpaid debt.
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