The Life Stages of Your Student Loan

Life Stages is a very popular term these days, articularly onWall Street, the industry that I hail from. There, the term is meantto encompass the various eras or stages of your life from a financialpoint of view—going to college, finding your first job, getting married, buying your first home, having kids—right on down the line to retirement.

The idea is that you should identify the various stages of your life and develop a financial plan to deal with them. At least that’s what Wall Street firms hope you will do. That way they can collect the hefty fees from all those big financial moves you’re making.

From a student loan standpoint, a life stages view is just as useful, although not as sinister as the kind you see in the financial services sector. In a student loan life cycle, you start the ball rolling by researching your loan options, applying for one (or more), accepting a loan, going to school and graduating, and then the last part of the cycle—paying off your loan—begins. All told, the life

stages thing can last up to 15 years or so, from the time you start looking for a loan to when you actually pay it off

The Early Phase—The Research Cycle

• You, along with your parents or guardian, begin researching financial aid options.

• You’re accepted at school.

• You begin the process of discovering what you can pay for on your own (with savings) and with nonloan financial aid (scholarships, grants, tuition breaks).

• The gap left between what you have to pay for and what you can afford to pay for is the amount of estimated money you’ll need in student loans.

• You begin the process of researching student loans.

• You identify the loan you want and complete and submit your application.

• Your lender approves your loan.

The Middle Phase

• A check is cut by the lending institution and delivered to your home or straight to your school’s financial office.

• The school takes what it needs to cover your tuition, room and board, and other expenses, and returns the remaining amount to you.

• The lending institution sends its first disclosure statement to your home (likely your parents’ home). This is particularly true for federal PLUS loans.

• The lender notifies the credit bureau that the loan has been transacted.

• You attend school, during which time you are not obligated to make any student loan payments.

The Last Phase

• You complete your education, hopefully with a cap-andgown affair upon graduation. Or you leave school early.

• You enter your grace period when you have, on average, from six to nine months before your first loan payment is due.

• Your lending institution, during this grace period, sends you a repayment disclosure statement detailing your loan obligations and the timetable for repaying them.

• When the grace period ends, you receive your first bill, usually a monthly one.

• You begin paying your student loans.

• If all goes well, you pay each month—or even prepay—until your loan is paid off.

• Your lending institution confirms that your loan obligation has been fulfilled.

• Your lending institution sends confirmation to credit bureaus that the loan has been retired.