When does student loan repayment start?
The Covid-19 pandemic resulted in a student loan payment pause for the past two years. This pause has left many wondering when student loan repayment starts. The pause on repayment is slowly coming to an end, as payments resume in December 2022. With that in mind, it is best to envision what student loan payments will look like.
People can expect loan payments to begin as early as the same academic year. The specific loan servicer will impact the timeline for when student loan payments are due.
Student loans, another form of aid in affording college expenses, accrue interest upon hitting your bank account. This means that the trade-off between lending the money to fund your institutional costs is having to pay it back for a greater monetary value.
Over time, this accruing interest can add up and negatively affect future financial decisions. To avoid falling into immense student debt, it is beneficial to be on top of every monthly payment. You can learn more about the student debt crisis in this guide.
Depending on the source of the loan, there will be different requirements in terms of time.
Federal student loans
Federal student loans are provided by the Government. These loans can be assessed based on financial need using the Free Application for Federal Student Aid (FAFSA), or on school enrollment status. Most borrowers are given a grace period where interest still accrues, but stalls monthly student loan payments so they do not have to be paid during college. To learn more about how to apply for federal loans, read this guide!
Direct Subsidized Loan - In this particular type of student loan, the government pays for any interest throughout your enrollment whether that be as a full-time or half-time student. The 6 months after graduation is also paid for before interest is included in your monthly payment.
Direct Unsubsidized loans - Similar to the subsidized loan, this one is also provided by the federal government except they do not pay interest during enrollment or the grace period. While interest accumulates during this time, students do not necessarily have to make the first payment right away.
While federal student loan borrowers can pay unsubsidized and subsidized loans off during school, they are only expected to begin repayment plans after the 6 month grace period after graduation ends.
Direct Parent PLUS loans - Since these loans are given to parents, federal student loan payments begin as soon as the funds are received in the bank account. If there is any financial hardship, borrowers can request deferment which is essentially a 6 month grace period after a child graduates or leaves school.
If a PLUS loan is taken by a graduate or professional student, they automatically receive the six-month deferment.
The good thing about Federal Student loans is that students have more time before they are required to begin making payments. They can focus on excelling academically while a student and pay off those loans after acquiring a stable footing in the workforce.
Private student loans
Private student loans can come from many different sources such as banks, organizations, institutions, credit unions, and agencies.
Due to these various origins, every private lender sets its own rules and regulations. Some may offer grace periods like Federal student loans, while others are adamant about immediate payment.
It is always best to read your loan documents carefully by keeping repayment plan timelines in mind, so you know when student loan payments start.
How do I know when to start paying my student loans?
The first step is to identify which type of student loan was taken out. As mentioned, every student loan has its own due date so there is no uniform schedule for student loan repayment.
If you have federal loans, you should expect payment to resume after the 6 month grace period ends. Federal student loan repayment is oftentimes not required during school as the government understands that not many students will be able to afford that.
This grace period allows graduated students to become financially stable before clearing out their loan balances.
Private lenders, however, are a little different as they have separate rules and regulations with their loans. It is advised for student borrowers to reach out to their specific loan servicer to get that clarity. Another useful form of information can be provided through a loan servicer's website.
Never be afraid to ask questions regarding your student loan payments because providers also want to help you through your academic journey!
Do student loans affect your credit score?
Student loans can and do affect your credit score. A credit score indicates your financial decisions and trustworthiness with money. Among the calculations that go into determining the score is debt and loan repayment history.
This score can affect your future purchases including renting or buying a house, car, or even something as simple as a credit card account. If loan payments are paid on time, they will be reflected in your credit history thus giving you a higher credit score. This opens doors for more financial liberty.
On the other hand, defaulted loans can have a negative hit on your score. A bad score discourages loan servicers from lending to you in the future regardless of how small it is.
Establishing a high credit score proves to be incredibly beneficial in the future, so take paying student loan payments seriously. These monthly payments are definitely not easy. Student loans should not be a route taken if there is any hesitancy in abiding by this strict schedule.
Scholarships are a great way to afford college without the fear of impending loan payments. Unlike student loans, there is no obligation to pay back any of the funds provided to you and is considered to be gift aid.
Are student loans canceled after 20 years?
In some cases, yes - student loans can be canceled after 20 years. However, only certain types of federal student loans are eligible for loan forgiveness.
In order to qualify, you must be making payments under an income-driven repayment plan. There also must be consistency in these payments with no defaulted loans. Most borrowers are eligible for future loan forgiveness if operating under a qualifying repayment plan.
It provides a sense of motivation to stay up to date on monthly payments and shows that student loans may not necessarily be a forever ordeal. Unfortunately, this is exclusive to federal student loan debt, but there are other options worth exploring.
Public service loan forgiveness
Working for the government or a not-for-profit sector can actually waive student loan debt after 10 years of payment for full-time employees. Public service loan programs are another great option to consider for loan cancellation.
Private student loans
While private loans are ineligible for student loan forgiveness, borrowers can look into refinancing. This essentially means taking out a new loan to replace an old student loan. Based on financial improvement, this might result in a lower interest rate with a reduction in monthly payment costs.
Another way to begin paying off student loans is through scholarships. Bold.org offers grants specifically intended to pay off student loan debt. This can be done at your convenience and can lower your expenses significantly. Explore them here.
Do student loans go away after death?
What happens to debt after death depends on the source of the loan, and in some cases, student loans can be discharged following a passing.
Federal student loans
If one dies with outstanding federal loan debt then those loans are guaranteed to be discharged. No one else is responsible for paying off those payments.
This also includes parent PLUS loans. If either the parent borrower or student the loan is obtained on behalf of dies, then all ongoing loan payments will be released.
Private Student Loans
Unlike Federal loans, there is no uniform standard shared amongst all private lenders.
While most organizations will discharge these payments once the primary borrower dies, no lender is necessarily required to suspend debt payments. It is possible that the financial burden can reallocate itself to a present co-signer instead and become a part of one's estate.