Student Line of Credit Payment Options

Paying off lines of credit is a major concern for many college graduates. With tuition fees skyrocketing and living costs remaining high, a college education can often come with a steep price tag, sometimes running students up to six figures in debt. Although professional and student lines of credit often have the option of deferred payment, the grace period for payment is rarely more than a year. Thus, college students with lines of credit should look into structured payment options before they graduate.

Structured Payment Plans

A structured payment plan is a payment schedule arranged between you, your bank and your lender. With a structured payment plan, you pay a set amount of your loan off every month. The monthly payments are arranged to be larger than the monthly accrued interest, so each payment chips away at the principal as well as the interest. Payments are made through your bank and are deposited from your checking or savings account to the accounts of your creditors. To set up a structured plan, speak with the financial services department at your bank.

Automatic Payments

Automatic payments go directly from your account to those of your creditors, without you having to authorize each payment. These payments are are taken directly from your bank account on your payday and continue until you decide to cancel them. To set up automatic payment, you must arrange to be paid by direct deposit, which generally requires that you give banking information or a voided check to your boss. Then, you may speak with your bank about setting up the payments. They will require the account information for your account with the loaning institution.

Loan Consolidation

Loan consolidation is the act of taking out one large, low-interest loan to pay off several smaller loans. Loan consolidation can be an appropriate strategy if you have a high interest line of credit and/or several credit cards from a private bank. To arrange for a consolidated loan, speak with a financial advisor or debt counsellor; these types of services are usually offered by smaller institutions rather than large banks. If you intend to consolidate your loans, make sure that your new loan will have a lower interest rate than the average rate of your existing loans.

Bank Payments

If you are comfortable with your ability to manage your debt on your own, conventional bank payments may be the best repayment option for you. A conventional bank payment is similar to an automatic payment, except instead of pre-authorizing a schedule of deductions from your paychecks, you simply set up your lender as a payee on your account and make payments as you are able to make them. This can be an attractive option if your debt burden is not overly daunting or if you are paid on an irregular schedule.