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The conventional way to manage your student loans in the past was to defer all payment while enrolled and begin repayment after graduating or leaving school. Unfortunately, to defer payment while in school will result in you accruing the maximum amount of interest and fees. To avoid this increase in debt, try the Bruin Budget Plan.
The Bruin Budget Plan is a seven-step series of money management techniques. When all steps are implemented, students will find their debt burden effectively reduced. In following the Bruin Budget Plan, you make small sacrifices while in school for which you will reap the benefits in the future. The key benefit is a smaller loan balance, which translates into a smaller loan payment.
While in school it is completely at your discretion to decide how much money you can afford to send to your lender each month. Sometimes students are able to send a payment greater than the suggested amount; at other times, less. If it does not cause a financial problem regarding your budget, then pay more than $20.00 each month. Obviously, the more you pay while in school means lower payments once you have graduated. And there is no penalty for prepayment. For Perkins Loans and Subsidized Stafford/Direct Loans, all in-school payments are applied directly to principal, benefiting you by reducing the overall interest paid on the loan.
Paying the accruing interest on an unsubsidized loan while you are in school is to your advantage. After leaving school, all unpaid interest will be capitalized at the conclusion of your grace period. Capitalization will result in the unpaid interest being added to the principal balance of the loan, which increases the total outstanding balance due in addition to increasing the interest you will pay. Also, note that it is usually best to pay the accruing interest on an unsubsidized loan before making voluntary in-school payments toward any subsidized loan.
(UCLA attempts to provide up-to-date information in our Bruin Dollars and $ense How To Series. Please be aware that the content of this document is based upon information that was correct at the time of publication. All information pertaining to and gathered from both UCLA and other sources is subject to change without notice.)