Douglas Olsen
Students typically begin repaying their student loans after graduating, leaving school, or dropping below half-time enrollment. Federal loans often offer a grace period, allowing repayment to be deferred for a set time. During this grace period, borrowers can decide on a repayment plan and whether to consolidate their loans. Private lenders may also offer grace periods and typically contact borrowers about repayment details. Parent PLUS loans are an exception, accruing interest from the disbursement date, with parents choosing to repay immediately or defer until graduation.
| Characteristics | Values |
|---|---|
| When do students start paying for student loans? | Generally, once a student graduates, drops below half-time enrollment, or leaves school, their loan enters a repayment period. |
| Who provides the information about when to pay? | The student's private lender or servicer. |
| What is a grace period? | A time after a student graduates, leaves school, or drops below half-time enrollment when they don't have to make payments. |
| When does the grace period end? | The grace period usually ends six months after graduation. |
| What happens after the grace period? | After the grace period, the student is required to begin making payments on a 10-year plan. |
| What about federal loans? | Federal loans may have a grace period, and they also offer the benefit of deferring or "pausing" loan payments if the student is unable to find a job. |
| What about Parent PLUS loans? | Parent PLUS loans are different. They accrue interest from their disbursement date, and parents can choose to start repayment immediately or defer until the student graduates. |
| What if I go back to school after taking a loan? | If a student returns to school for further education, their loans can go back into in-school deferment. |
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What You'll Learn
Federal loans and grace periods
Federal student loans typically offer a grace period, which is a set amount of time after graduation, leaving school, or dropping below half-time enrolment when you are not required to make payments. This grace period usually lasts for six months, as is the case with the Federal Stafford Loan, Federal Direct Loan, and Federal Perkins Loan. During this time, you can decide on a repayment plan and whether to consolidate your loans.
It is important to note that once the grace period ends, you will need to start making payments on a 10-year plan. However, if you have federal loans, you may be able to defer or pause payments if you are unable to find employment. Additionally, if you return to school during the grace period, you may be eligible for another grace period when you exit. This is not the case with Stafford or Direct Loans, where a new grace period is not provided after the initial one expires.
The Federal Perkins Loan operates on a quarterly billing cycle, meaning that while the grace period is nine months, interest only begins accruing after this period, and the first payment is due at the end of the first quarter of the billing cycle. For example, if your grace period ends in December, your first payment will be due in March.
It is always beneficial to make extra payments towards your loans, even during the grace period, to minimise the total amount repaid over time.
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Private loans and repayment
Private student loans are offered by a variety of lenders, including Sallie Mae, ELFI, and SoFi. These loans can help students pay for undergraduate, career training, or trade school costs, including tuition, housing, books, and other expenses. There are several key factors that students should consider when taking out private loans, such as annual and cumulative loan limits, interest rates, fees, and loan terms.
Private student loans typically have two types of interest rates: fixed and variable. Fixed rates remain constant throughout the loan period, while variable rates start low and gradually increase over time. Interest rates on private loans are generally higher than those on federal loans. To make informed borrowing decisions, students can use tools like Finaid's Loan Payment Calculator to estimate their future repayment amounts.
In terms of repayment options, private lenders usually offer flexibility. Some lenders provide immediate, deferred, interest-only, or fixed repayment plans. Students can choose to make monthly interest-only payments or opt for a fixed monthly payment while still in school. Additionally, some lenders offer incentives such as a lower interest rate when enrolling in autopay or maintaining good grades.
After graduation, leaving school, or dropping below half-time enrolment, private loans generally enter the repayment phase. The private loan servicer typically contacts the borrower via email or mailed billing statements. It is important for borrowers to be aware of the terms and conditions of their loans, including any applicable grace periods or deferment options.
Compared to federal loans, private loans may offer fewer options for consolidating debt or pausing payments if a borrower faces difficulties finding employment. Therefore, it is advisable for students to carefully research the available loan options, understand the repayment requirements, and make informed decisions about their borrowing.
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Parent PLUS loans
Generally, student loans enter repayment once the student graduates, drops below half-time enrolment, or leaves school. Most federal loans have a "grace period", during which no payments are required. After this grace period, the borrower must begin making payments, typically on a 10-year plan.
There are a few key differences between Parent PLUS loans and other types of federal student loans. Firstly, a credit check is required to determine any late payments and recent defaults in the borrower's credit history. Secondly, the interest rate for Parent PLUS loans is typically higher than that of private student loans, especially for parents with excellent credit. The interest rate for Parent PLUS loans disbursed between July 1, 2025, and June 30, 2026, is fixed at 8.94% for the life of the loan. Additionally, there is a 4.228% fee for loans disbursed on or after October 1, 2020. These rates can change annually on July 1, but once the loan is taken out, the rate remains fixed.
Parents can choose to immediately begin repayment on the PLUS loans or defer until their child graduates. It is worth noting that private student loans may offer lower interest rates than Parent PLUS loans, so it is recommended to compare different options before deciding.
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In-school deferment
Generally, student loans enter repayment once the student graduates, drops below half-time enrolment, or leaves school. Most federal loans have a grace period, which is a period after any of these occurrences during which the borrower does not have to make payments. Towards the end of this grace period, the borrower should decide whether to consolidate their federal student loans, determine their repayment plan, and whether to enrol in autopay.
Additionally, in-school deferment can impact the overall cost of the loan. By deferring payments, the total amount of interest paid over the life of the loan may increase. This is because interest may be capitalized, or added to the principal balance, causing the borrower to pay interest on the interest. As such, it is important for borrowers to carefully consider their options and understand the terms of their loans before choosing to defer their payments.
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Loan consolidation
In the context of student loans, loan consolidation refers to combining multiple federal education loans into a single federal loan. This is done through a Direct Consolidation Loan offered by the U.S. Department of Education. Consolidation is different from refinancing, although the two terms are sometimes used interchangeably. Refinancing involves consolidating your loans with a private lender and receiving new rates and terms.
Consolidating federal student loans can simplify the repayment process for borrowers who have multiple loans with different loan servicers. By consolidating, borrowers can make a single monthly payment instead of keeping track of multiple payments to different servicers.
It's important to note that consolidating federal loans through a Direct Consolidation Loan does not reduce the interest rate. The resulting interest rate is a weighted average of the previous loan rates, rounded up to the nearest 1/8 of a percent. Therefore, consolidation is generally not a money-saving option. However, it can provide access to additional income-driven repayment plans and Public Service Loan Forgiveness (PSLF).
To apply for a Direct Consolidation Loan, borrowers can follow these steps:
- Log in to the StudentAid.Gov website to access the direct consolidation loan application.
- Gather the necessary documents before starting the application, as listed in the "What do I need?" section.
- Choose which loans you want to consolidate and which you do not.
- Select a repayment plan, either based on your loan balance or tied to your income.
- Read the terms carefully before submitting the application online.
- Continue making your current loan payments until you are notified that the consolidation is complete.
It's worth mentioning that student loan repayment typically begins after graduation, dropping below half-time enrolment, or leaving school. Private loan servicers often provide information about repayment, while federal loans may have a grace period before repayment starts. During this grace period, borrowers can consider their options, including loan consolidation, determining their repayment plan, and enrolling in autopay.
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Frequently asked questions
Students typically have to start paying back federal student loans six months after graduating, leaving school, or dropping below half-time enrollment.
No, you can pay them off sooner if you want to.
With subsidized federal student loans, the government pays the interest until six months after you graduate. With unsubsidized loans, interest starts accruing immediately.
Your private loan servicer should contact you about repayment.
The U.S. Department of Education's Federal Student Aid website is the definitive source for this information.
