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Student loans can be a complicated topic, but we’re here to help you understand how they’re paid back.
When students get student loans, they agree to pay back the money with interest. The amount of interest varies depending on whether you’re paying out of pocket or through a loan through your school. In general, interest rates are lower for federal loans than for private loans.
The repayment period for student loans varies depending on how much money you borrowed and what kind of loan it is:
Federal student loans have different repayment options depending on the type of education you received: Direct Subsidized Loans have a 10-year repayment plan with an interest rate of 4% or less; Direct Unsubsidized Loans have a 10-year repayment plan with an interest rate of 6%; Subsidized Federal Stafford Loans have a 10-year repayment plan with an interest rate of 4%; Unsubsidized Federal Stafford Loans have a 10-year repayment plan with an interest rate of 6%; Perkins Loans have no set repayment period but must be paid back within 30 years.
Private student loans typically come with fixed or variable rates and can have short-, medium-, or long-term repayment periods
Should I refinance to my federal student loans into a private loan?
As a federal student loan borrower, you have certain rights that are not typically available with private loans. While refinancing your federal student loans into a private student loan can sometimes lower your interest rate, your private student loan will not necessarily have the same terms and conditions as your federal student loan.
You should carefully review the terms of a private student loan before you give up the benefits available on federal student loans. The following are some examples of benefits that you may lose if you refinance your federal student loan into a private student loan:
- Access to temporary loan payment relief through approved periods (deferment or forbearance) when you do not have to make payments because of financial hardship, continuing your education, or military service
- No interest accumulation on subsidized student loans during periods when payments are deferred
- Access to repayment plans based on your income that provide loan forgiveness once you have been in repayment for 20 or 25 years
- Access to various forms of loan forgiveness and discharge, such as Public Service Loan Forgiveness, teacher loan forgiveness, total and permanent disability discharge, and borrower defense to repayment discharge
When You Must Begin Payments
Once you graduate, drop below half-time enrollment, or leave school, your federal student loan goes into repayment. However, if you have a Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loan, you have a six-month grace period before you are required to start making regular payments. You’ll have a nine-month grace period if you’ve got a Perkins Loan. (Got a PLUS loan? You’ll go into repayment as soon as the loan is fully disbursed—which means once it’s paid out. But if you’re a graduate and professional student PLUS borrower, you will be placed on an automatic deferment while in school and for six months after graduating, leaving school, or dropping below half-time enrollment.)
Note: When your loan enters repayment, your servicer will automatically place you on the Standard Repayment Plan. You can request a different repayment plan at any time.
You can make prepayments on your loan while you are in school or during your grace period. Be aware, however, that any prepayment you make will not count as a qualifying payment in any loan forgiveness programs.
Your loan servicer will provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.
Your billing statement will tell you how much to pay. Your monthly payment amount depends on your repayment plan. If you signed up for electronic communication, pay attention to your email. Most loan servicers send an email when your billing statement is ready for you to access online.
The Grace Period
For most federal student loan types, after you graduate, leave school, or drop below half-time enrollment, you have a six-month grace period (sometimes nine months for Perkins Loans) before you must begin making payments. This grace period gives you time to get financially settled and to select your repayment plan. Not all federal student loans have a grace period. Note that for most loans, interest accrues during your grace period. You can choose to pay the interest that accrues during your grace period. This prevents that interest from being added to the principal balance (also known as interest capitalization).
Loans and Their Grace Periods
Review this list to find out whether your loan has a grace period.
- Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period before payments are due.
- PLUS loans do not have a grace period; but if you received a PLUS loan as a graduate or professional student, you’ll automatically get a six-month deferment after you graduate, leave school, or drop below half-time enrollment. No payments are required during this six-month deferment period. If you’re a parent borrower who took out a PLUS loan to pay for your child’s education, you can request a six-month deferment after your child graduates, leaves school, or drops below half-time enrollment. Contact your loan servicer for more information.
- If you received a Federal Perkins Loan, check with the school where you received your loan.
Circumstances That May Affect Your Grace Period
Certain situations that may affect your grace period include the following:
- Active duty military—If you are called to active military duty for more than 30 days before the end of your grace period, you will receive the full six-month grace period when you return from active duty.
- Returning to school before the end of your loan’s grace period—If you reenroll in school at least half-time before the end of your grace period, you will receive the full six-month grace period when you stop attending school or drop below half-time enrollment.
- Loan consolidation—If you consolidate your loans during your grace period, you give up the remainder of your grace period and begin repayment after your Direct Consolidation Loan is processed (unless you request to have the processing of your consolidation loan delayed until closer to the end of your grace period).
Making Payments
The U.S. Department of Education (ED) uses several loan servicers to handle the billing and other services on loans for the William D. Ford Federal Direct Loan (Direct Loan) Program and for loans that were made under the Federal Family Education Loan (FFEL) Program and that ED later purchased. Your loan servicer will set you up under the Standard Repayment Plan unless you tell your loan servicer you want a different repayment plan.
| Type of Loan | Send Payments To | When to Send Payments |
|---|---|---|
| Direct Loans and FFEL loans owned by ED | Your loan servicer | Check with your loan servicer. |
| FFEL loans not owned by ED | The bank, credit union, or other lending institution that made the loan (also known as the lender) | Check with your lender. |
| Federal Perkins Loans | Your school or the billing agency your school designates | Check with your school. |
If you schedule an automatic monthly electronic debit of your loan payment from your checking or savings account, you receive a 0.25% interest rate deduction on Direct Loans. Contact your loan servicer for more information. To make a payment by postal mail, contact your loan servicer for the mailing address.
To discuss repayment plan options or change your repayment plan, contact your loan servicer. First, though, you can use our Loan Simulator to get an early look at which plans you may be eligible for and see estimates for how much you would pay monthly and overall.
I want to get ahead by paying extra each month.
You can make payments before they are due or pay more than the amount due each month. Paying a little extra each month can reduce the interest you pay and reduce the total cost of your loan over time. Contact your loan servicer to discuss these options.
I’m having trouble making my loan payment.
Contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that lowers your monthly payment and, in some cases, may be based on your income. You can also ask your loan servicer about your options for a deferment or forbearance or loan consolidation.
Try this Resource
Trouble Making Your Federal Student Loan Payments? provides information on what to do if you are having difficulty making your student loan payments.
I’ve missed one or more loan payments.
Stay in touch with your loan servicer—especially if you are struggling to make payments on your loans. Your loan servicer will explain your repayment options, such as applying for an income-driven repayment plan or a forbearance or deferment, to help you stay on track or get back on track when you fall behind.
One thing you definitely want to avoid is going into default! This occurs when you are at least nine months past due on your student loan. The consequences of default include damage to your credit rating and future borrowing ability. They may also include garnishment of your wages and withholding of your tax refunds. If you can’t make payments, contact your loan servicer to find out your options.
Having Your Student Loan Forgiven
You are generally required to repay your student loan, but in certain situations, your loan may be forgiven, canceled, or discharged.
Student Loan Repayment
Before repayment begins, develop a plan that puts you on track to pay back your loan on time and in full.I need more information about my loan servicer.I need more information about the types of repayment plans available.When You Must Begin PaymentsThe Grace Period
Making Payments
Having Your Student Loan Forgiven
Understanding the details of repayment on your federal student loan can save you time and money. Find out
- what repayment plan options are available,
- when you must begin making payments,
- how to make your payment,
- how to pay off your loan faster, and
- what to do if you have trouble making payments.
I need more information about my loan servicer.
Find out who services your federal student loan(s).
Try This Resource
Federal Student Loans: Repaying Your Loans—Provides information about federal student loan repayment plan options, finding loan history and loan servicers, and making payments.
I need more information about the types of repayment plans available.
Learn more about Repayment Plans.
REMEMBER: Your federal student loans can’t be canceled or forgiven because you didn’t get the education or job you expected or you didn’t complete your education (unless you couldn’t complete your education because your school closed).
Student loans can be a scary thing to take on, but they’re not impossible to get out from underneath. The best way to pay off your student loan debt is by being proactive about it!
First of all, make sure you know what kind of loan you have and how much it’s going to cost you in the long run. If you have a federal loan with no consolidation options, consider looking at refinancing your loan through [company name] or another private lender—or even applying for a new private loan that better suits your needs.
If you have a lot of money in savings and can afford to pay more than the minimum amount due on your loans every month, do it! Paying more than the required amount will reduce the total amount of interest over time and help you get out from under faster.
Finally, if there’s any way possible for you to refinance or consolidate your loans into one streamline payment, do it! You’ll save loads of money on interest by doing so!
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