How to Prepare to Pay Back Your Student Loans

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If you took out student loans to pay for school, you’re not alone. Around 55% of college students graduated with student debt in 2020, according to data from the College Board.

Although the CARES Act paused payments for most federal student loans since 2020, they’re set to resume on Jan. 1, 2023. Now is a good time to start preparing for student loan repayment.

Here’s what you need to know about paying back your student loans:

How to prepare for student loan payments

After you graduate, leave school early, or your enrollment status drops below half-time, you have a six-month grace period before you’re required to start making federal student loan payments. This gives you time to prepare financially and to choose a repayment plan that best fits your unique circumstances.

However, student loan payments for private student loans vary by lender. While some lenders give you a six-month grace period, other lenders might require you to start making payments while you’re in school.

The type of student loan you have dictates when student loan interest starts to accrue.

  • Direct Subsidized Loans: If you have a Direct Subsidized Loan, the U.S. Department of Education pays the interest that accrues on the loan while you’re in school, during periods of deferment, and for up to six months after you graduate.
  • Direct Unsubsidized Loans: With this type of federal student loan, you’re responsible for the interest that accrues as soon as your loan funds are disbursed. You can make interest-only payments while you’re in school or let it be added to your total balance.
  • Private student loans: Like Direct Unsubsidized Loans, you’ll be responsible for the interest that accrues when your private loan funds are disbursed.

Tips for student loan repayment

Here are some actions you can take to get ready for student loan repayment:

  • Update your contact information. If your loan servicer doesn’t have your accurate contact information, you may not receive important updates about your loan amount and new payment due date. You can update this information by logging into your loan servicer’s website. Plus, if you have federal student loans, you should make sure your profile is up to date.
  • Create a budget with student loan repayment built in. If you don’t already have a budget, creating one is a good idea. Next, track your expenses for a month or two to identify where you can trim expenses to make room for student loan payments.
  • Boost your income. Although increasing your income may be a challenging task, it’s possible. You can pick up several side hustles, such as ride-sharing, tutoring, and dog walking. Alternatively, you could contact your employer’s human resources department about student loan repayment assistance. Some employers offer this as an incentive to help them retain top talent.
  • Enroll in autopay to avoid late fees. To ensure that you don’t miss any payments, sign up for autopay. Just make sure you have enough money in your account to cover the automatic monthly payment agreement. Otherwise, you’ll risk paying an overdraft or insufficient funds fee.
Good to know: If you sign up for automatic payments, some lenders will reduce your interest rate by 0.25%. Although it may not sound like a lot, this small rate reduction could save you hundreds of dollars in interest over the life of your loan.

Which loans have grace periods?

The following types of student loans usually have grace periods:

  • Direct Subsidized and Unsubsidized loans: Also known as Direct Stafford Loans or Stafford Loans, these loans come with a six-month grace period before you need to start making payments.
  • Some private loans: Some private lenders offer six-month grace periods as well. You’ll have to check with your loan servicer to see if this benefit is offered.

If your student loan doesn’t come with a grace period, you may qualify for other deferment options. For example, if you’re unemployed and have a federal student loan, you can apply for an unemployment deferment. Also, some private lenders may be willing to pause your payments if you’re experiencing financial hardship.

It’s important to note that the federal student loan payment pause has been extended through Dec. 31, 2022. This means, for most federal student loans, no payments are due and the interest rate has been temporarily lowered to 0%.

Tip: If you have a private student loan and you’re unsure who your student loan servicer is, the Consumer Financial Protection Bureau recommends checking your credit reports. You can get a copy of your reports from all three major credit bureaus — Equifax, Experian, and TransUnion — by visiting

Do PLUS Loans have a grace period?

Parent PLUS Loans don’t come with a grace period. But if you took out a PLUS Loan while you were a graduate or professional student, the U.S. Department of Education will automatically grant you a six-month deferment period after:

  • You graduate
  • You leave school early
  • Your enrollment status drops below half-time

You can also get a six-month deferment if you took out a PLUS Loan for your child. But it’s not automatic — you’ll have to request this deferment after your child graduates, leaves school early, or drops below half-time enrollment status.

How much should I pay each month?

Your minimum monthly student loan payment is based on many factors, like the type of student loan you have, your interest rate, and the length of your repayment term. Generally speaking, the longer your repayment term, the lower your monthly payment will be (and vice versa).

But keep in mind that you can always make more than the minimum monthly payment to save money on interest and pay back your student loans faster.

The default payment plan for federal student loans is the 10-year Standard Repayment Plan. You’ll be automatically enrolled in this plan once your loan payments begin unless you choose a different repayment plan.

What if I miss a student loan payment?

If you miss a student loan payment, you can expect several potential negative consequences. For starters, your lender will likely charge you a late fee. And, depending on how late your payment is, your loan servicer will likely report your late payment to one or more of the three major credit bureaus. As a result, this can damage your credit score.

In addition, if you have a federal student loan, you’ll default on the loan once your payment becomes 270 days past due. For private loans, you’ll typically default on the loan when your student loan payment is at least 90 days late.

Defaulting on your student loan can cause more damage to your credit. And even worse, defaulting on a federal student loan could lead to your wages being garnished.

Keep Reading: Missed a Student Loan Payment? This is What Could Happen

What if I can’t afford my monthly payment?

If your income isn’t high enough to afford your federal student loan monthly payments, you might be eligible for one of the four income-driven repayment plans: the Income-Based Repayment Plan, Income-Contingent Repayment Plan, Pay As You Earn Repayment Plan, and Revised Pay As You Earn Repayment Plan.

These repayment plans are based on your income and family size, and repayment terms range from 20 to 25 years.

If you have multiple student loans, you may be able to refinance them. Refinancing your loan involves taking out a private loan to pay off your existing student loans. If you qualify for a lower interest rate, you can lower your monthly payment.

Good to know: Before you refinance your federal student loans, keep in mind you’ll lose access to federal benefits, such as access to federal loan forgiveness programs and income-driven repayment plans.

Check Out: 11 Best Student Refinance Companies: Reviewed and Rated

What are loan forgiveness options?

If you have federal student loans, you may qualify for several student loan forgiveness programs, such as:

  • Public Service Loan Forgiveness (PSLF) Program: If you work full-time for a government or not-for-profit employer, you might qualify for PSLF. With this program, you can receive loan forgiveness after making 120 qualifying monthly payments while enrolled in an income-driven repayment plan.
  • Teacher Loan Forgiveness Program: If you teach for five consecutive years at an eligible low-income school, you can receive up to $17,500 in student loan forgiveness.
  • The Biden-Harris debt relief plan: If your income was below $125,000 in 2020 or 2021 ($250,000 if you file married filing jointly or head of household), you can qualify for up to $10,000 in forgiveness — or up to $20,000 if you received a Pell Grant while in college.
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About the author
Jerry Brown
Jerry Brown

Jerry Brown is a personal finance writer, owner of the Peerless Money Mentor blog, and a contributor to Credible. He has written for major publications such as Forbes Advisor, Business Insider, and Rocket Mortgage.

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