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Paying Back Student Loans: How and When to Start Paying Back Student Loans

Graduating from college or graduate school may feel like the accomplishment of a lifetime. However, more and more students are valuing the end of their student loan payments as another milestone in their education.

Two-thirds of students who graduated with a Bachelor’s degree in 2017 took on student debt to meet their education goals. If you are among the growing majority and have student debt, understanding your student loan repayment terms and responsibly paying on time can help you pay back your loans more quickly and smoothly.

When Do You Have to Start Paying Back Student Loans?

Your loan repayment start date will depend on the terms in your loan agreement. If you have just graduated, left school, or are currently taking less than the required credits to be considered attending part-time, you are in a grace period, deferment, or repayment. If you aren’t sure, call your student loan servicer to get the details on your repayment status.

What are student loan grace periods?  

A grace period is the time period between graduation, withdrawal, or dropping to less than part-time and the student loan repayment start date. According to the Federal Student Aid website, “Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans have a six-month grace period before payments are due.” PLUS loans do not have a grace period. Grace periods for private student loans may vary.  If you have questions about your lender’s grace period policy, please reach out to them directly.

During your grace period, interest may continue to accrue unless otherwise noted in your loan terms. While you may not be required to make payments on your loan during this time, it may be a good idea to get a jump start on your loan payments to avoid interest capitalization (when accrued interest is added to your principal balance). Keep in mind it’s important to consider your own financial situation and to choose a repayment plan that is right for you.

Read more: Repaying Student Loans with Earnest: 7 Amazing Things You Can Do as a Client

What is deferment?  

Deferment is a temporary postponement or reduction of loan payments. If you enlist in the US military or return to school to finish or earn a new degree, your current federal loans may go into deferment and you will not be required to make payments during that time. Deferment policies may vary between private student loan lenders. Get in touch with your servicer or lender for more information on their policies.

For some federal loans, interest will not accrue during this period, but it is important to confirm with your loan servicer.

Understanding your student loan repayment schedule 

When entering a repayment or grace period, federal student loan borrowers will be required to complete exit counseling. This is an online course through StudentAid.gov that will help borrowers understand each repayment option that applies to their loan. Private student loan borrowers are not required to complete exit counseling.

If you have already been through exit counseling and maybe want to re-evaluate the options for federal loan repayment, check out the Repayment Plans page on the Federal Student Aid website. The plans range from 10- to 25-year repayment timelines, so there are lots of options.

How Do I Make Payments on My Student Loans Each Month?

When your bill or payment alert comes in each month, it is on the borrower’s shoulders to make sure the payment is submitted. If you move after finishing school you will want to make sure to update your address with your servicer, or opt for electronic alerts or statements if that is available.

For federal loan borrowers who haven’t made their first payment, you can sign into your account on the Student Aid website to find your servicer and get set up with their payment system. If you have any questions during the process, your school’s financial aid office is a great place to get help, or you can call your loan servicer’s helpline. Private student loan servicers often have their own payment platform directly accessible from their website.

If you can set up automatic payments and know you won’t have an overdrawn account by doing so, this could be a simple way to make sure you have paid your bill each month on time. Some servicers might even offer an interest rate discount for signing up for autopay.

4 Tips for Making Student Loan Repayment Manageable

Now that you know when you need to start making payments, it is time to figure out how to make those payments manageable. Here are four steps to set yourself up for repayment success.

Read more: Paying Off Student Loans? Try the 20% Rule

Understand your total monthly payment and if you can afford it

While you might have picked a repayment option that seemed appealing at first, situations and budgets can change. If your monthly payment amount is not sustainable with your current budget, first see if you can make it work by trimming other areas of spending. If your student loan payments continue to stand out as the largest burden, you could reach out to your servicer to learn what options you have for lowering your monthly bill.

Research repayment support and forgiveness programs

If you are looking for support making payments on your student loans, there are a number of options out there for US military personnel, doctors, nurses, lawyers, and teachers. If you are working for a government organization, 501(c)(3) not-for-profit, AmeriCorps, or the Peace Corps, you might be able to apply for Public Service Loan Forgiveness.

Most of the repayment support or forgiveness programs are not quick solutions to student loan debt, so expect to be committed to this repayment strategy for the long haul.

Create a budget around student loan monthly payments

Student loan payments might mean a large dent in your already stretched monthly cash flow. It is important to take your fixed payments (rent, loan payments, utilities, etc) and figure out what you have left for discretionary spending before you are required to start making payments.

Being proactive and aware of where your money is going is also a strong life-skill that will help you reach financial goals more quickly.

Consider refinancing your student loans

If you are not currently utilizing a perk, like income-driven repayment, offered through your federal loan, or have a private student loan, you might consider applying to refinance your loan with another company (like Earnest!)

Borrowers refinance their loans in order to get a lower interest rate and potentially make one monthly payment as opposed to multiple payments to various servicers. Whether you want to pay off your student loans faster, or just reduce your student loan payments to get inline with your budget, refinancing could be a solid option.

This article was written by Carolyn Pairitz Morris, Senior Editor at Earnest.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.