When do you have to start paying student loans?
The process of getting a student loan can often feel too easy, and many students are left in the dark when it comes to paying off these loans. So, when do you have to start paying student loans? The answer to this can be complicated as knowing when student loan payments start is based on several details. You might begin paying student loans immediately once funds are disbursed, or you might be able to wait until you graduate from college.
The student loan debt in the United States totals $1.745 trillion, and each year around 31.8% of students take out federal student loans. Student loan debt is a growing crisis for college students, but thorough research and planning can help avert many students' fears of insurmountable student debt.
When you will need to start making student loan payments can differ based on what loan type you have. With certain loans, like Federal Perkins Loans, students won't have to begin repaying their loan until nine months after they leave school or drop below half-time enrollment. It is important to note the specific details of the student loans you have taken out to determine when you have to start repaying them.
A multitude of factors will affect your student loan repayment timeline, such as whether you have private student loans or federal student loans. Some student loans will not require you to begin repayment while in school, while others require you to begin monthly loan payments immediately after funds are sent to your school.
Looking at the details of your particular student loans and having a repayment plan in place is important to help stop your student debt from snowballing into a larger headache. Get ahead of your student debt by familiarizing yourself with student loans and staying informed on policy changes concerning student debt made by the federal government.
Student loans are a crucial part of student aid, but they are not always the best option. Scholarships can be a great option for college students who want to avoid student loans. Many scholarships even provide debt relief for students who already have student loans.
On Bold.org you can access hundreds of exclusive scholarships to aid you through your student loan repayment. Scholarships are a form of gift aid that does not have to be paid back making them an alternative to burdensome student loans. Sign up on Bold.org and begin your search today.
How long do you have until you have to start paying student loans?
Generally, you won't need to begin making loan payments until you graduate, leave school, or drop below half-time enrollment. This allows students the ability to focus on their education without worrying too much about their finances. While this is the case for most loans, knowing how your particular loan works will allow you to better figure out the timeline of when you should begin making your student loan payments.
Many loan repayment plans include a grace period, which is a set amount of time before your loan payments must begin. This allows students a brief period to transition into their careers before they have the added stress of a student loan billing statement. If you have a Direct Loan or Federal Family Education Loan you'll receive a six-month grace period, and if you have a Perkins Loan you'll receive a nine-month grace period.
However, this is not the case for all loans, loans from a private lender may require students to begin making payments as soon as the loan is disbursed. In such cases, student loan payments start even before a student graduates or maintains less than half-time enrollment.
Student borrowers should work with their loan servicers to choose a student loan repayment plan that works best for them. The U.S. Department of Education advises 10 years as the ideal timeframe to pay off student loans. Specific student loan repayment plans will detail when you should make your first payment towards your student loan balance, and when you should expect to be finished paying off your student loans. To learn more about how long it takes to pay off student loans click here.
While you often don't have to begin making student loan payments until you finish your schooling, many students find it beneficial to start repaying their student loans before they have to. For students with subsidized loans, their student loans won't begin to accrue interest until they graduate. This means that by paying off loans early, students can save money by not allowing interest to build up.
How do you make student loan payments?
To begin paying your student loans you need to set up a repayment plan. Typically, a default repayment plan will be selected for you before your loan repayment begins, but you have other options available to you. You have the choice to select the plan that works best for your particular situation.
For Federal Student Aid, if you do not select a repayment plan then you will automatically opt into the Standard Repayment Plan. With the Standard Repayment Plan, payments are set at a fixed amount each month paid over 10 years. Federal loans also offer several income-driven repayment plans in which payments are a percentage of your income. An income-driven repayment plan can set your monthly student loan payment to an affordable amount as the payment is based on your discretionary income and family size.
An income-driven repayment plan can make your student loan repayment more manageable. Though, if you still have trouble meeting the payment amount with an income-driven repayment plan, you can contact your loan servicer and discuss your options. Your loan servicer can tell you if another repayment plan would better fit your needs, or you can request forbearance if you're experiencing an exceptional hardship.
If you want to pay off your loan earlier and reduce the total interest, then you can prepay your loan by making larger payments or making payments even when they are not required. Making loan prepayments can save you money and reduce the total time you will spend paying off your loans.
Are student loans ever forgiven?
In some cases, you may be able to have your student loans forgiven. If you qualify for student loan forgiveness or debt cancellation, you will not be required to repay some or all of your student loans. There are many different programs that would make you eligible for student loan forgiveness.
Programs such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness will forgive your federal student loans if you work in a specific eligible field. Other loan forgiveness programs will provide debt relief if your college shuts down, in some cases of bankruptcy, and in many other circumstances.
Loan forgiveness programs usually only extend toward federal student aid, so private loans do not often qualify for forgiveness. The federal government only sponsors loan forgiveness programs intended for federal student loan borrowers, but there are some private forgiveness programs. For a more in-depth review of student loan forgiveness check out The Ultimate Guide on Student Loan Forgiveness in 2022.
Do student loans affect your credit score?
Student loans can have an effect on your credit score. Missing some of your monthly payments can negatively affect your credit score, but having student debt show up on your credit report can also be a positive effect of student loans.
Your credit score can be negatively impacted if you miss student loan payments or default on your loans, but student loans can work in your favor. Making student loan payments can show credit bureaus you make wise financial decisions, and having student loans will establish your credit history. Responsibly paying your student loans can help you build credit and bring your credit score up. To learn more about how your student loans impact your credit score, check out this blog on student loans and credit.
Frequently asked questions about paying student loans
Do student loans fall off after 7 years?
Your student loan debt will be removed from your credit report either after you've paid them off or 7 years after you default on your loans. Most federal student loans will be considered default if you have not made any payments towards the loan for 270 days. Even though a record of your student loan will be removed from your credit report after 7 years, your student loan will not go away.
There are many negative effects if you miss payments and your student loans go into delinquency or default. Some of the most common consequences are that your wages may be garnished and you will be charged penalty fees, but there are many other repercussions.
What happens if you cannot pay student loans?
If you cannot pay your student loans then you should contact your loan servicer and let them know of your hardship. Most loan servicers will offer alternative payment plans and allow you to adjust your monthly payment amount. Many borrowers opt for income-driven repayment plans as they can be more affordable.
If you cannot meet the lowest monthly payment offered, you can apply for loan forbearance. Loan forbearance will pause or even further lower your monthly loan payments for a period. Another option is to look into student loan forgiveness and cancellation programs to see if you qualify to have some or all of your student loan balance forgiven.
What is a grace period?
To allow new graduates time to transition and settle their finances before they have to make their first payment towards their loans, many loans have a grace period before student loan repayment begins. A student loan grace period is a set amount of time during which you will not be required to make a monthly payment on your student loans. Most federal student loan payments will be paused during a grace period of 6 to 9 months, but many private loans do not offer the same advantages.
During a student loan grace period, loans may still accrue interest, so it can still be a good idea to make voluntary payments. Even small payments that only pay off the interest can save students money in the long run.
What is the difference between subsidized and unsubsidized loans?
Subsidized loans and unsubsidized loans offer many different advantages for students. Subsidized loans are only for undergraduate students, and you must demonstrate financial need in order to qualify for a subsidized loan. The U.S. Department of Education will pay the interest of subsidized loans while a student is enrolled in college and during a grace period. With unsubsidized loans, interest accrues during college and grace periods, but a loan's lending limits are usually significantly higher than with subsidized loans.
What is a student loan payment pause?
A student loan payment pause is a suspension of loan payments for a set period of time. Student loan borrowers who are having trouble making their monthly payments can request loan forbearance, which will allow them to lower their payments or put a payment pause in place for up to 12 months. While you might not be required to make monthly loan payments during a payment pause, student loans will often still accrue interest.
Since March 2020, federal student loans have been on a payment pause. This student loan pause suspended loan payments and gave a 0% interest rate which helped those facing economic hardships due to the COVID-19 pandemic. This student loan payment pause is set to end on December 31, 2022.
Can I use scholarships to pay my student loans?
Many scholarships will allow students to use the awarded funds to pay off their student loan debt. Students can find a list of grants to pay off their student loans on Bold.org. With such scholarships and grants, the funds will be distributed to the loan servicer to help students pay off the remaining balance of their loans.
For more information regarding scholarships, loans, and other topics related to higher education you can visit Bold.org.
Are scholarships better than loans?
Student loans offer students a way to cover college expenses that they are unable to pay out of pocket or that scholarships and other aid do not cover. Loans are important for allowing many students to attend college, but they do have to be paid back, so this isn't always the best option for students.
Student aid comes in a variety of different forms. The most common types of student aid are scholarships, grants, and loans. Depending on a student's particular eligibility and financial need, their student aid package will come with some mix of the three.
While scholarships aren't necessarily better than loans, most students try to stay away from student loans and student debt by getting more scholarships. Scholarships can be a more sensible option as students can apply for an unlimited amount of scholarship funds without worrying about debt. Scholarships allow students to get an education at no cost to themselves. You can read more about the differences between scholarships and loans here.