When Do Student Loan Payments Start?

If you’re wondering when your student loan payments will start, the answer depends on a few different factors. Read on to learn more about when you can expect to start making payments on your student loans.

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The Grace Period

The majority of federal student loans, as well as some private student loans, come with a period of time after graduation (referred to as a “grace period”) during which the borrower is not required to begin making payments. This grace period gives the borrower time to get financially settled after graduation. The length of the grace period varies depending on the type of loan. For Stafford Loans, the grace period is six months. For PLUS Loans, there is no grace period; repayment begins immediately after the loan is fully disbursed.

What is it?

The Department of Education (ED) requires recipients of federal student aid to make regular loan payments after they leave school or drop below half-time enrollment. The first payment is due within 60 days after the final loan disbursement for that academic year is made.

For example, if you received your last loan disbursement for the 2019-2020 academic year on May 10, 2020, your first loan payment would be due no later than July 8, 2020. If you received multiple disbursements for a single academic year, each disbursement will have its own grace period. Your first payment will be due no later than 60 days after the date of your last disbursement for that academic year.

How long does it last?

The grace period is a set amount of time after you graduate, leave school, or drop below half-time enrollment before you have to begin making payments on your student loans. For most federal student loans, the grace period is six months. If you have a Stafford Loan that was first disbursed on or after July 1, 1993, or a Direct Loan that was first disbursed on or after July 1, 2008, you’re entitled to a grace period of six months. For all other federal student loans, the grace period is nine months. Private student loans don’t usually come with grace periods.

Federal student loan repayment plans include:

-The Standard Repayment Plan: You’ll pay a fixed amount each month for up to 10 years. Your monthly payment will be at least $50, and you’ll pay the least interest over time.

-The Graduated Repayment Plan: Your payments will start out low and increase every two years for up to 10 years. You’ll pay more interest over time than with the Standard Repayment Plan, but your early payments will be lower, which can help if you expect your income to increase steadily over time.

-The Extended Repayment Plan: You can extend your repayment period to up to 25 years if you have more than $30,000 in outstanding Direct Loans or more than $30,000 in outstanding FFEL Program Loans as of October 7, 1998. With this plan, your monthly payments will be lower than under the Standard Repayment Plan because you have more time to repay your loan; however, over the life of the loan you’ll pay much more in interest because your loan will be outstanding for a longer period of time.

-The Income-Based Repayment (IBR) Plan: Under IBR, as long as your income falls below certain thresholds (which are updated annually), your monthly payment could be as low as $0 per month and still satisfy the requirements of the plan (although some interest accrues during periods when your payment is less than the full amount of interest that accrues). Payments are capped at 15% of your discretionary income (defined as adjusted gross income minus 150% of the poverty level for your family size), and any balance remaining on your loan after 25 years of qualifying payments is forgiven.

-The Income-Contingent Repayment (ICR) Plan: The ICR plan is similar to IBR; however, under ICR your monthly payment is based on 20% of your discretionary income (also defined as adjusted gross income minus 150% of the poverty level for your family size) instead of 15%. The key difference between IBR and ICR is that if you don’t make qualifying payments for 25 years under IBR then any balance remaining on your loan is forgiven while there’s no forgiveness under ICR – instead, any unpaid portion of principal and accrued interest is capitalized (added to the outstanding principal balance) at repayment and repayment continues until the loan is repaid in full or through other means such as deferment or forbearance.

What happens if you don’t make a payment during this time?

If you don’t make a payment during your grace period, your loan will go into repayment. You might receive a bill in the mail, or your loan holder might contact you to set up a repayment schedule. If you don’t make payments on your Direct Loan or FFEL Program loan, you will default and might have to pay additional fees. You might not be able to get additional federal student aid if you default on a student loan.

Post-Grace Period

The post-grace period is the 6-month period after you graduate, leave school, or drop below half-time enrollment when your first student loan payment is due. Your loan servicer will contact you before your grace period ends to discuss your repayment options and to select a repayment plan. If you don’t make a payment during your grace period, you’ll enter repayment and may be charged late fees.

What are the consequences of not making a payment during this time?

If you don’t make a payment on your student loans during your six-month grace period after you leave school, you will be considered delinquent.

Being delinquent on your student loans has serious consequences. To start, one or more of the following may happen:
-Your account will be turned over to a collection agency.
-You will lose your grace period, which means you will have to start making payments immediately.
-The entire unpaid balance of your loan may become immediately due and payable.
-You will no longer be eligible for deferment or forbearance, and you may lose eligibility for additional federal student aid.
-Your loan holder may report your delinquency to one or more national credit bureaus, damaging your credit rating and making it difficult for you to get a car loan, buy a house, or get a job.

The Standard Repayment Plan

Your federal student loan payments will usually start 6 to 9 months after you graduate, leave school, or drop below half-time enrollment. This time is called a grace period. For most loans, the grace period is 6 months. If you have a Direct Subsidized Loan, Direct Unsubsidized Loan, or Subsidized Federal Stafford Loan, you don’t have to pay interest on your loan during your grace period. For most other loans, interest will accrue during your grace period.

If you have a Direct PLUS Loan or Unsubsidized Federal Stafford Loan, you can choose to begin making payments immediately after your loan is disbursed (i.e., paid out), or you can defer them for up to 6 months. The interest accrues during this time, however, so if you plan to defer payments, it’s generally a good idea to pay the interest as it accrues so that it doesn’t get added to the principal balance of your loan (and increase the amount of interest you pay overall).

You might also want to consider making payments while in school and during your grace period to lower the amount of interest that accrues on your loans. Making even small payments can save you money over the life of your loan. You can make voluntary payments on any type of federal student loan at any time by contacting your loan servicer.

What are the monthly payments?

The monthly payment on student loans can vary based on the type of loan, the length of the repayment period, and the interest rate.

For example, the monthly payment on a $10,000 loan with a 6% interest rate and a 10-year repayment period would be $117.00.

The monthly payment on a $10,000 loan with a 6% interest rate and a 20-year repayment period would be $63.00.

The monthly payment on a $10,000 loan with a 6% interest rate and a 30-year repayment period would be $48.00.

As you can see, the monthly payment decreases as the length of the repayment period increases. However, you will ultimately pay more in interest over the life of the loan if you choose a longer repayment period.

The Income-Based Repayment Plan (IBR)

The Income-Based Repayment Plan (IBR) is intended for borrowers who have a high debt-to-income ratio. Under IBR, your required monthly payment is capped at an amount that is intended to be affordable based on your income and family size. Your actual monthly payment may be less than the monthly amount due on the Standard Repayment Plan.

The Pay As You Earn Repayment Plan (PAYE)

The Pay As You Earn Repayment Plan (PAYE) is available to debtors with federal student loans who can demonstrate financial hardship. Your monthly loan payment is capped at 10 percent of your discretionary income, and any remaining debt is forgiven after 20 years of repayment.

To qualify for the PAYE plan, you must be a new borrower as of Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011. You also must not be in default on your loans.

The Revised Pay As You Earn Repayment Plan (REPAYE)

The REPAYE Plan caps your monthly payments at 10% of your discretionary income. If you have unpaid interest on your loans when you make your monthly payment, that interest is added to your loan balance (capitalized) at the end of each year or when you enter repayment if during the grace period or deferment/forbearance.2 The REPAYE Plan is available to both new and returning borrowers as of December 17, 2015.3

If you are a new borrower on or after July 1, 2014, you are automatically placed in the REPAYE Plan.4 If you are an existing borrower, you can choose the REPAYE Plan if it offers a lower monthly payment than the repayment plan you’re currently in.5 You must have direct subsidized and/or direct unsubsidized loans to be eligible for the REPAYE Plan—parent PLUS loans and private student loans are not eligible.6

If you qualify for the Public Service Loan Forgiveness Program (PSLF),7 you may want to consider enrolling in the Income-Based Repayment Plan or Pay As You Earn Repayment Plan instead of REPAYE because payments made under these plans may count towards loan forgiveness under PSLF.

The Income-Contingent Repayment Plan (ICR)

The Income-Contingent Repayment Plan (ICR) is available to all Direct Loan borrowers, as well as holders of the FFEL Consolidation Loan. Your monthly payment amount is 10% of your “discretionary income,” and is recalculated each year based on changes in your income and family size.

Discretionary income is the difference between your adjusted gross income (AGI) and 150% of the poverty guideline for your family size and state of residence. For example, for a family of four in 48 contiguous states, Puerto Rico, or Guam with an AGI of $50,000, discretionary income would be $50,000 – ($150% x $16,920), or $33,080. Therefore, your monthly payment under ICR would be 10% x $33,080 = $3,308 per year.

What are the monthly payments?

The monthly payment is the amount you pay each month to repay your loan. The amount is determined by your loan repayment plan. You can see what your monthly payments will be under each plan before you choose a repayment option when you first begin repaying your loan. You can also change repayment plans at any time. If you’re having trouble making payments, contact your loan servicer to discuss your options.