When Do You Have to Start Paying Back Your Student Loans?
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You may have to start paying back your student loans sooner than you think. Depending on the type of loan you have, you may have to start making payments while you’re still in school.
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Introduction
Most students don’t have to start repaying their federal student loans until after they graduate or drop below half-time enrollment.
If you have any other type of loan, or private student loans, you may need to start repaying your loan as soon as the money is disbursed. Check with your lender to find out when you need to start making payments.
You’ll get a six-month grace period after you graduate, leave school, or drop below half-time before you’re required to begin repaying most federal student loans. If you have Direct Subsidized Loans or Direct Unsubsidized Loans, you’re not responsible for making any payments on your loans or accruing any interest during your grace period. If you have Subsidized Federal Stafford Loans or Unsubsidized Federal Stafford Loans first disbursed to you before July 1, 2012, and enter repayment on or after July 1, 2012, there’s a limit on the amount of interest that can accrue during your grace period. This limit does not apply to Direct PLUS Loans and Direct Consolidation Loans first disbursed on or after July 1, 2006. For these types of loans, interest will accrue during your grace period. If it isn’t paid before repayment begins, it will be added to your unpaid principal balance at the beginning of repayment.
Your student loan servicer will contact you about a month before your grace period ends and let you know when repayment will begin and how much your monthly payment will be. You can also contact your servicer yourself at any time for this information.
If you choose not to make payments during your grace period, remember that interest will continue to accrue on unsubsidized and PLUS loans. This means that the total amount you owe on these types of loans may be significantly higher than what is reflected on your first bill after the grace period ends.
The Different Types of Student Loans
There are four main types of student loans: federal Stafford loans, federal Perkins loans, federal PLUS loans, and private loans. All four types have different repayment plans and options. For example, federal Stafford loans have a fixed interest rate, while federal Perkins loans have a variable interest rate. Private loans usually have a higher interest rate than federal loans.
Federal Student Loans
All federal student loans are issued through the Direct Loan program. This program offers four types of loans:
-Direct Subsidized Loans: These loans are available to undergraduate students with financial need. The federal government pays the interest while you’re in school at least half-time, during your grace period, and during deferment periods.
-Direct Unsubsidized Loans: These loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need. You’re responsible for paying the interest on these loans from the time they’re disbursed until they’re paid in full. If you choose not to pay the interest while you’re in school and during grace periods and deferment or forbearance periods, your interest will accumulate and be capitalized (that is, added to the principal amount of your loan).
-Direct PLUS Loans: PLUS loans are available to graduate or professional degree students and parents of dependent undergraduate students through the Direct Loan program. Eligible borrowers with good credit can borrow up to the cost of attendance minus any other financial aid received. PLUS loan applicants who have an adverse credit history may still receive a Direct PLUS Loan if they obtain an endorser who does not have an adverse credit history or if they document extenuating circumstances relating to their adverse credit history.
-Direct Consolidation Loans: You may consolidate (combine) all of your eligible federal student loans into a single Direct Consolidation Loan for repayment purposes.
Private Student Loans
Assuming you’re not eligible for any grants or scholarships and you’ve exhausted all of your federal student loan options, you may have to consider private student loans.
Unlike federal student loans, private student loans are not owned or backed by the government. They are offered by banks, credit unions, and other private lenders. Private student loan terms and conditions are set by the lender, not the government. That said, there are some consumer protections that apply to all private student loans, such as bans on certain fees and the right to cancel the loan within a limited period of time.
The biggest difference between federal and private student loans is that private student loans generally have higher interest rates and fees. That’s why it’s always best to first exhaust your federal student loan options before turning to private lenders.
If you do have to take out a private student loan, make sure you shop around and compare offers from multiple lenders. Pay close attention to the interest rate, fees, repayment terms, and grace period before choosing a loan.
When Do You Have to Start Paying Back Your Student Loans?
Most students don’t have to start paying back their student loans until after they graduate. The six-month grace period begins when you graduate, leave school, or drop below half-time enrollment. You’ll get a bill in the mail about two months before your first payment is due. If you don’t want to wait until then, you can sign up for auto-debit, which will deduct your payments from your bank account each month.
Federal Student Loans
Federal student loans offer a number of benefits that you won’t find with private loans, including deferred repayment options, income-driven repayment plans, and loan forgiveness programs. But one thing to keep in mind is that you will probably have to start making payments on your federal student loans sooner than you think.
For most federal student loans, the grace period is six months after you graduate, leave school, or drop below half-time enrollment. That means if you take out a loan for the fall semester of your senior year, you won’t have to make a payment until six months after you graduate.
However, there are some federal student loans that do not have a grace period. For example, Federal Perkins Loans and Direct PLUS Loans for parents and graduate students are immediately due after they are disbursed. That means you’ll need to start making payments on these types of loans as soon as they are disbursed to your school (usually within 10 days).
If you’re not sure when your first payment is due, you can check the repayment schedule for your specific loan on the National Student Loan Data System (NSLDS).
Private Student Loans
Most private student loans have a grace period of six months after you graduate, leave school, or drop below half-time enrollment before you have to start making payments. But depending on the type of loan you have, you may have to start making payments while you’re still in school.
With some private student loans, you can choose to make interest-only payments while you’re in school and for a grace period after you graduate. If you choose this option, your monthly payments will be lower, but the total amount you repay will be higher because you’ll be paying interest for a longer period of time.
Other private student loans offer discounts if you sign up for automatic payments from a checking or savings account. These discounts can save you money over the life of your loan.
What Happens If You Can’t Pay Back Your Student Loans?
Defaulting on your student loans has serious consequences. If you can’t make your student loan payments, you could end up damaging your credit, losing your job, or even going to jail. Let’s take a look at what could happen if you can’t pay back your student loans.
Federal Student Loans
Most federal student loans have a six-month grace period after you graduate, leave school, or drop below half-time enrollment before you have to begin repaying your loan.
The first step in repayments is to contact your loan servicer and let them know that you have graduated, left school, or dropped below half-time status. They will then provide you with information on your repayment options and the date your first payment is due.
If you are unable to make your payments, there are several options available to you, including deferment and forbearance. If you decide to pursue one of these options, you will need to contact your loan servicer.
You may also be eligible for an income-driven repayment plan, which bases your monthly payment on a percentage of your income. You can apply for an income-driven repayment plan online at studentaid.gov or by contacting your loan servicer.
Private Student Loans
Private student loans are loans that are made by a private lender, such as a bank, credit union, state agency, or school. These loans are not guaranteed by the federal government and typically have higher interest rates than federal student loans. You may also be required to pay additional fees with a private student loan.
If you have trouble making your payments on a private student loan, contact your lender immediately to discuss your options. You may be able to defer or forbear your loan payments, or you may be able to consolidate your loans into a new loan with different terms. If you can’t make any kind of arrangement with your lender, your account may be turned over to a collection agency, which could damage your credit score.
How to Avoid Defaulting on Your Student Loans
Defaulting on your student loans has serious consequences that can lead to wage garnishment, damage to your credit score, and difficulty qualifying for future loans. If you’re struggling to make your student loan payments, there are a few things you can do to avoid default.
Federal Student Loans
There are two types of student loans: federal student loans and private student loans. You can find out what type of loans you have by logging in to StudentLoans.gov with your Federal Student Aid PIN. If you can’t remember your PIN, you can request a duplicate PIN be sent to you.
If you have federal student loans, you won’t have to start making payments until six months after you leave school. This is called a grace period. For Direct Subsidized Loans and Direct Unsubsidized Loans, the grace period is six months. For Direct PLUS Loans for graduate or professional students, and for Parent PLUS Loans, the grace period is nine months. Your loan servicer will send you a notice before the grace period ends, letting you know when your first payment is due. Make sure you keep in touch with your loan servicer during your grace period so that you know when your first payment is due and so that no late fees are assessed.
If you’re not sure who your loan servicer is, log in to StudentLoans.gov with your Federal Student Aid PIN and click on the Account Summary page for contact information.
Private Student Loans
Federal student loans offer many benefits, including low, fixed interest rates and income-driven repayment plans. Private student loans don’t have these same benefits, but they may be a good option if you need to fill a funding gap.
Before taking out a private student loan, consider all your other options. If you need to borrow, make sure you understand the terms and conditions of your loan.
When you’re ready to apply for a private student loan, compare lenders to get the best deal. Be sure to compare interest rates, fees, and repayment terms before selecting a loan.
Conclusion
There is no one answer to the question of when you have to start repaying your student loans. It depends on the type of loan you have, the repayment plan you choose, and other factors. However, there are some general guidelines you can follow.
If you have a federal student loan, you will generally not have to start repaying the loan until after you graduate or leave school. If you have a private student loan, you may be required to start making payments while you are still in school.
You can always choose to make payments on your student loans early, even if you are not required to do so. Making early payments can save you money in interest and may help you pay off your loans more quickly.
