When Should I Start Paying My Student Loan

Paying Back Your Student Loans

Generally, most student loans give you some time after you graduate to get your career and finances in order. A traditional federal student loan grace period is typically six months. Its important to know when youre expected to start repaying your loans, and what your options are in terms of lowering your interest rate or monthly payment.

Ready to start paying back your student loans? Learn more about how SoFi student loan refinancing might help.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.SOSL18201

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Saving Money On Interest Charges

While the government pays the interest on subsidized federal loans as long as youre enrolled at least half time, unsubsidized loans begin to accrue interest from the moment you or your school receives the money. Most private student loans also start accruing interest right away.

If you dont pay the interest that builds on your loans while youre in school or during your student loan grace period after graduation, then that interest is capitalized .

Interest capitalization means you end up paying interest on your interest. This can add years to your student loan repayment period and cost you thousands of dollars over the lifetime of your loan.

Ideally, you would make interest-only payments while youre still in school in order to prevent capitalization. Some lenders also suggest paying $25 per month to cut down on interest charges.

However, if you need to borrow money to fund your education, it might not be possible to make payments while youre still a student. Still, if you can afford it once youve graduated or otherwise left school, then its high time to take control of your financial destiny and begin repayment, even if your first payment isnt technically due yet.

What Should I Do During The Grace Period

The grace period gives you time to get your finances in order before you start repaying your student loan.

Finding work should be your first priority. An income is essential for making your loan repayments regularly.

The grace period also gives you time to research your repayment options and decide which one will work best for you. You may also like to consolidate your student loans during the grace period to avoid multiple repayment bills.

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How Much Do I Pay Each Month Can I Pay More

Your minimum monthly payment is based on the type of loan, the amount you owe, the length of your repayment plan and your interest rate. Typically, borrowers have 10 to 25 years to repay federal loans entirely. Shorter lengths of repayment time or larger loans will result in higher monthly payments.

The Standard 10-year Repayment Plan is by far the most popular plan with borrowers, but that doesnt mean it is the best plan for you. This is the default plan. Borrowers are automatically enrolled in the Standard Repayment Plan unless they choose a different one.

Youll make fixed monthly payments for 10 years. Its a great plan if you can afford the monthly payments and the cheapest option long term because youll pay a lot less in interest. If you lack the income to support these payments, however, you should enroll in one of the income-driven repayment plans.

Or perhaps you have in mind applying for the Public Service Loan Forgiveness program. Work full-time in a qualifying field government at any level, or not-for-profit organizations that are tax-exempt under Section 501 of the Internal Revenue Code and make 120 qualifying monthly payments, and whatever balance remains will be forgiven.

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Can I Pay Back Student Loans While Still In School

While you dont have to make payments on your loans while youre in school, you have the option to pay down your student loans including paying down interest on any unsubsidized loans, which will save you money in the long run. To see if you have student loans with other servicers, log in to nslds.ed.gov.

When Do Student Loan Payments Start

Good news for student loan borrowers. You wont have to start repaying student loans until the moratorium expires, which is at least September 30, 2021.

For graduating students, there is also something called a grace period that can be anywhere from six months to nine months. This provides a period of adjustment after you graduate, drop out, or slip below half-time status. The grace period is designed to provide a chance to find a job, select a repayment plan, and begin earning an income before youre swamped with bills.

Are you unemployed? You may be eligible for an unemployment deferment. For federal loans, if you qualify, you could suspend monthly payments for as many as 36 months. However, borrowers must reapply every six months, demonstrating proof of unemployment benefits and an active job search.

For private loans, any variety of deferment is at the discretion of the lender.

The following types of loans have six-month grace periods:

• Direct Subsidized/Unsubsidized Loans
• Some private student loans

PLUS loans have no grace period, and you must begin repaying them as soon as they are fully disbursed. However, those who receive PLUS loans as a graduate or a professional student get an automatic six-month deferment after graduation, leave school, or dip below half-time enrollment.

Similarly, parents who secure PLUS loans for their childs education may request a six-month deferment under the circumstances mentioned above.

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Contact Your Federal Student Loan Servicer

Federal student loan servicers should contact you about the restart of your loan payments. For example, Iâve received several voicemails from my federal student loan servicer, Nelnet, reminding me that payments will be due again beginning on Feb. 1, 2022. Make sure you havenât ignored those calls or letters.

âThe most important piece of advice I share with all borrowers, regardless of how long theyâve been paying their loans, is to read,â Stacey MacPhetres, senior director of education finance at EdAssist Solutions, tells Fortune. âRead every piece of mail and email you get regarding your loans so you can make knowledgeable and informed decisions about your payments.â

Some student loan servicers donât appear quite ready yet for this massive load of transactions to start up again, though. In July 2021, Democratic senators Elizabeth Warren and Ed Markey sent a letter to Biden with findings from a questionnaire sent to federal student loan servicers that indicate the companies needed more time âto ensure that borrowers are supported when reentering payment on their student loans.â

âBorrowers who had been in repayment prior to the CARES Act should identify their loan servicer,â MacPhetres says. âThey may be able to restart with the servicer they had prior to the CARES Act forbearance if loans are in transition, which should be identified on the servicer site.â

When Do You Have To Start Paying Back Student Loans

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Whether youre still a student or are already in the working world, it feels like between project deadlines and the rest of life, theres enough to worry about. Add on any stress of those student loans waiting for their first payment, and it might feel like youre drowning.

But not knowing when that first loan repayment is due can add more stress when that day finally creeps up on youand that day may be sooner than you think. So when do you have to start paying back student loans?

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Your Personal Financial Position

A critical factor in deciding whether to pay down your debt as opposed to boosting your retirement savings is the effect the move will have on your finances. Things to consider, include:

• Emergency savings: Its important to have money tucked away for a rainy day. These funds need to be instantly accessible and are used in the event of a financial crisis. While financial pundits may recommend a good three to six months worth, our founder Ramit Sethi considers 12 months worth of emergency savings a safer option. Your emergency savings need to be topped up first before you can start paying additional funds towards debt or investments.
• Payments up-to-date: If you happen to be behind on any of your debt, its better to get back on track before adding money to an existing installment. This is because those arrears can wreak havoc on your financial standing with your bank and other service providers. It can also wreck your credit score.
• Your basic needs are met: While long-term plans such as debt repayments and retirement planning benefit from added payments, its important that immediate needs are seen to. This includes housing, food, transport, and utilities.
• You still have fun money: When youre not able to do any of the things you love, the road to financial freedom becomes a dreadful journey. Choose something that youre happy to save some guilt-free spending on. This amount can increase as you start ticking financial goals off your list.

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Should I Pay Off Student Loans Early

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You should pay off student loans early only if youve built a solid financial foundation by:

• Saving at least one month of basic expenses for emergencies.

• Setting up automatic contributions to a retirement account like a 401 or Roth IRA.

• Paying off any debt usually credit cards that has a higher interest rate than your student loans.

If youre anxious to pay off student loans fast, pay a little extra while working toward your savings and investment goals. Heres why meeting these goals first is important, and how to pay off student loans early if your financial footing is already strong.

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When Should You Start Paying Back Your Student Loans

Youve graduated from college. After four years of studies, youre finally able to enter the workforce, the real world. But finding a position in your chosen career may be more challenging than you anticipated, and creditors will soon be expecting you to pay off your student loans. Understanding your options and how much time you have to pay back your student loans is essential in maintaining your credit.

Establish An Emergency Fund

If you don’t already have an emergency fund, you could pause your student loan payments and redirect them into an emergency fund. This helps in two different ways first, having an emergency fund can help protect you against unexpected expenses. And second, it keeps you in the habit of not spending that monthly amount. That way, when your regularly scheduled payments return, it won’t be as much of a shock to your budget.

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Changes To Support You During Covid

As of April 1, 2021, no interest will be charged on Canada Student Loans and Canada Apprentice Loans. This measure is temporary. For more information, please see the proposed changes in this years budget announcement.

Provincial interest rates may still apply. Contact the NSLSC or your province or territory to find out more.

Sections on this page impacted by these temporary changes are flagged as Temporary COVID-19 relief.

If Your Student Loans Have High Interest Rates

Yes, paying off your student loans early is a good idea.

If you have high student loan interest rates federal student loans can have rates as high as 8.5%, while private loans can be even higher a good deal of your monthly loan payment goes toward interest rather than principal, increasing how much youll pay over time. Paying off your private or federal loans early can help you save thousands over the length of your loan since youll be paying less interest.

If you do have high-interest debt, you can make your money work harder for you by refinancing your student loans. With a stable income and good credit score, you could qualify for a low interest rate, helping you save more and become debt-free faster. Plus, theres no limit to how many times you can refinance and there are no fees to do so either.

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If You Have Lots Of Credit Card Debt

No, paying off your student loans early is not a good idea.

If you have credit card debt, paying off your balance should be the priority before turning to your student loans. While student loans can have high interest rates, credit card interest rates can be staggering. The average credit card interest rate is 16.97%, as of September 2019.

With such high rates, youll probably save more money by paying off your credit card debt first than if you focused on your student loans. Take a look at how much youd pay interest on your credit card debt and student loans over the course of 10 years:

Keep in mind, though, that your credit card interest rate and loan APR are specific to you. So, do your own calculation to see what makes the most sense for your situation.

Who You Need To Repay

You may have loans or lines of credit that you need to repay to the government and/or your financial institution.

In some provinces and territories, Canada Student Loans are issued separately by the federal and provincial or territorial governments. This means that you could have more than one loan to pay back.

Verify your contracts to determine where your debt comes from and where you need to repay it.

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Is It Bad To Pay Off Student Loans Early

Yes, paying off your student loans early is a good idea. Paying off your private or federal loans early can help you save thousands over the length of your loan since youll be paying less interest. If you do have high-interest debt, you can make your money work harder for you by refinancing your student loans.

Start Repaying 6 Months After Leaving School

After finishing school, there is a 6-month non-repayment period. No interest accrues on your loan during this time. When this period is over you have to start making payments on your Canada Student Loan. Temporary COVID-19 relief

Contact your province for information on interest charges to your provincial loan.

The 6-month non-repayment period starts after you:

• finish your final school term
• reduce from full-time to part-time studies
• leave school or take time off school

If you need to take leave from your studies, you might qualify for Medical or Parental Leave.

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Paying Your Loans Off Faster

As mentioned above, making payments on your student loans during the grace period may save you thousands of dollars and take years off of your repayment period, helping you pay off your loans faster.

In addition to avoiding interest capitalization, you can make strides toward reducing your principal balance. Check out our prepayment calculator to see how much you could save by making extra payments during the federal student loan grace period.