When Do Student Loan Payments Start?

On June 30, 2023, the Supreme Court struck down the Biden student loan forgiveness program which promised between $10,000 and $20,000 of debt cancellation for qualified borrowers. Many signed up for the program – and were approved. But with the Supreme Court's decision, the time that borrowers have been dreading has finally come: federal student loan payments are resuming – and with astonishingly short notice.

Student loan payments are set to start in October 2023, though the exact starting date may vary depending on your issuer. However, interest will begin accruing a month earlier, on September 1, 2023. We’ve compiled important dates, details, and tips about how to prepare to start making payments again (or for the first time) and what options are available if you can't afford your student loan payments.

How soon do I need to repay my student loans after graduating?

Don't assume that you need to start repaying your student loans as soon as you graduate. The precise timeline of when you're expected to make payments will depend on the type of loan you took out (did you use federal student aid?), the school you went to (is it a public or private institution?), and what your future plans are (are you going to consolidate your federal student loans or go to grad school?). Your answers to these questions can affect when you begin repaying student loans.

Federal Direct Loan Repayment

Whether unsubsidized or subsidized, all Federal Direct Student Loans have a 6-month grace period. If you graduate in May, your payments generally start before the end of that year. If you graduate in December, your payments will generally start early summer of the next year.

Stafford Loan Repayment

Stafford Loans have the same grace period as Federal Direct Loans. Payments start after 6 months for both subsidized loans and unsubsidized loans.

Perkins Loan Repayment

Perkins Loans are a little trickier because they usually come through your school instead of directly through the government. Talk to your loan officer at your college/university to see if your loans have a grace period or if payments start right after graduation.

PLUS Loan Repayment

PLUS Loans don’t have a grace period. You have to start paying them off as soon as they are fully disbursed.

Private Student Loan Repayment

Some private student loans have a grace period of 6 months, just like Federal Direct and Stafford Loans. However, it really depends on the private institution you borrowed from. Consult your lender to find out when your payments start.

Where do I make student loan payments?

Making payments on your student loans is not the same for everyone.

Loans owned by the Department of Education – such as Direct Loans and FFEL Loans – are paid to your loan servicer. This is a separate institution contracted by the DoED to monitor and collect your student loans. You can usually sign up through the loan servicer’s website and make payments or set up automatic payments very easily.

If you have FFEL Loans not owned by the Department of Education, you pay your lender. This lender is usually a credit union, bank, or other institution. All information about your loans will come through this lender.

Perkins Loans are different. The loan servicer for Perkins Loans is usually part of the school you attended, but sometimes, other servicers will be contacted. Communicate with your school to learn how to make payments.

How to prepare for student loan payments

1. Verify your servicer and your information

Your very first step is confirming who holds your loans. Many borrowers experienced a change in their student loan company during the student loan hiatus. If you don’t remember who your servicer was you can log into your StudentAid.gov account and scroll to the “My Loan Servicers” section of your dashboard. You can also call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.

2. Enroll in a repayment plan

You can choose from several student loan repayment plans when you have Federal Student Loans. Some are straightforward and some are more complicated – but they all have their benefits.

The most common plan is the standard repayment plan. It’s a simple plan that spreads out equal payments over a term of 10-30 years, depending on your level of debt. If your estimated monthly payments on the standard repayment plan seem high, there are other plans you can enroll in. Here are a few options that could make your monthly costs more manageable.

• Graduated repayment plan: Has lower monthly payments to start that grow every 24 months. It’s designed for people in careers with steadily increasing incomes.
• Income-based repayment (IBR): An income-driven repayment plan that calculates monthly payment based on a percentage of your income. If you’re a new borrower on or after July 1, 2014, then it’s usually 10 percent of your discretionary income for a term of 20 years. If you’re not a new borrower, the term is 25 years. Percentages may vary because payments will never be higher than the 10-year standard repayment plan.
• Income-contingent repayment (ICR): Another income-driven repayment plan with a term of 25 years. Payments in an ICR are either 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted to your income – whichever is less.
• Pay As You Earn (PAYE): An income-driven repayment plan that only applies to loans taken out after October 2011. It has the lowest payments at only about 10% of your discretionary income. Borrowers can skip or reduce payments if they fall below their state’s U.S. Department of Health and Human Services Poverty Guideline amount. Its term is 20 years.
• Revised Pay As You Earn (REPAYE): The REPAYE plan is virtually identical to the PAYE plan but with payments based on a couple's combined income, whereas PAYE only relies on the individual's income (as long as they file taxes separately), which usually makes PAYE the more advantageous option. However, it is being replaced by the new SAVE plan and those currently enrolled in REPAYE will automatically be switched over.

3. Enroll in auto-debit

Many loan servicers offer a 0.25-point interest discount to borrowers who enroll. It seems small, but interest charges can add up quickly! Sign up to have your student loan payments automatically deducted from your account each month. Not only will you save money, but you’ll also never miss a payment.

4. Start budgeting for student loan repayment

The estimated average monthly student loan payment is a whopping $503. That’s a huge adjustment to make to your monthly costs.

Instead of letting that charge take you by surprise, get ahead of it by readjusting your budget right now. If you already have a budget in place, now is the time to review it. Compare your planned spending with your actual spending for the past three to six months.

Are there areas where you’ve been consistently overspending or underspending? Change your budget to reflect more accurate estimates. If you need to create a budget from scratch, follow Debt.com’s guide here.

Once you’ve reviewed and revised your current budget, add your monthly student loan payment to the mix. Does it put you in the red, or do you have enough money to spare? Re-adjust your budget to fit the payment in as much as you can. This is definitely the toughest step, especially if you have a large monthly payment.

You may need to either save less or find a way to earn more. Look into repayment plans with lower monthly payments, side hustles, or even career changes.

What if I'm not ready to make student loan payments?

The Department of Education has instituted a few safety nets to make resuming student loan payments a little less painful. There’s the new income-driven repayment plan called SAVE which promises to be the “most affordable repayment plan ever created”, a temporary on-ramp period so there are fewer penalties for late or missed payments, and the Fresh Start program – a lifeline for borrowers with federal student loans in default.

The new income-based repayment plan: SAVE

Saving on a Valuable Education, or SAVE, is the newest income-driven payment plan offered by the U.S. Department of Education. It won’t go fully into effect until July 1, 2024, but several critical elements will begin this summer before student loan payments resume in October.

SAVE is replacing the existing REPAYE (Revised Pay As You Earn) plan with a handful of tweaks that can save borrowers up to $1,000 a year, according to the official Federal Student Aid website. Here’s a quick rundown of how the SAVE plan works and what sets it apart from existing income-based repayment options.

• There’s a higher income threshold. The SAVE plan increases the income exemption from 150% to 225% of the poverty line. Under old plans, an individual couldn’t make more than $21,870 and qualify. With SAVE, that income threshold jumps to $32,805. Those who fall below the SAVE income exception or who make less than $15 an hour will have a $0 monthly payment and won’t have to make any payments at all.
• Unpaid interest won’t cause your balance to grow. 100% of interest will be eliminated from the monthly payments of both subsidized and unsubsidized loans. You will only be charged your payment amount. Any accrued interest that would normally be added to your balance, won’t apply.
• Your spouse’s earnings are excluded from household earnings. Married couples who file their taxes separately don’t have to include their spouse’s income in the SAVE application. You can also choose to exclude your spouse when selecting household size.

There are a lot more substantial updates coming when this payment plan is fully implemented next year. Even so, the SAVE plan is shaping up to be one of the most dramatic and cost-effective student loan repayment plans ever offered. If you were already on the REPAYE plan before, you will automatically start on the SAVE plan. If not, you can apply by filling out the income-driven repayment application and selecting SAVE.

Reduced penalties for late, missing, or partial payments

It’s finally time to start making payments again – but not everyone feels prepared. In anticipation of the (very) brief notice, the Department of Education implemented a temporary on-ramp period beginning October 1, 2023, and ending September 30th, 2024. During this time, borrowers with a missed, late, or partial payment will not be:

• Considered delinquent
• Reported to the credit bureaus.
• Placed in default.
• Referred to debt collection agencies.

The “on-ramp” period applies to all borrowers automatically – no qualification or application needed. Note: A missed payment could affect qualification for Public Service Loan Forgiveness, which requires no missed payments. If you’re working toward PSLF, contact your servicer.
Interest will accrue during this period, but will not capitalize after it. If you aren’t on an income-driven repayment plan, future bills will adjust to show the interest accrued during this time.

Defaulted student loan assistance with the Fresh Start program

Borrowers with federal student loans in default have a way to get back in good standing with Fresh Start, another temporary program offered by the U.S. Department of Education.
This program can help reverse the damage to your credit history, restore access to government loans, and make you eligible for deferment or forbearance.

• Loan status on credit reports will be shown as “current” rather than “in collections”
• Negative marks on your credit reports from the default will go away.
• Collection efforts will cease.
• You’ll regain access to federal student loans and other government loans, such as mortgages.
• You can get some relief through deferment or forbearance.
• You’ll qualify for income-driven repayment plans that can make repaying your student loans more affordable.
• Under a one-time waiver, you can get three years of credit toward an income-driven repayment plan during the pandemic payment freeze.

The enrollment deadline is September 2024. To qualify for Fresh Start, you must have federally-held student loans that were in default prior to the student loan payment pause on March 13, 2020. Loans that are not eligible for the program are government-held FFELP loans, government-held Perkins loans, and privately-held FFELP loans. Begin at this federal website if you want to enroll your defaulted loans in Fresh Start.

Other forms of student debt relief

Consolidation

You can consolidate your educational loans to lower your payments. This will also help ensure your loans can qualify for repayment plans, such as income-based repayment.

Forgiveness/Cancellation

In some cases, graduates can get part or all of their student loans forgiven or canceled. This depends on your career, region of residence, and a few other factors.

Refinance

If you think you could qualify for a better interest rate, refinancing your loans is an option that could help you owe less. Just be aware that to refinance for a lower rate, you’ll need to convert any federal student loan debt to private through a private lender. This will make the loans you refinance ineligible for federal relief options, including loan forgiveness.

Private Student Loan Settlement

If you took private loans, you may be able to settle them and pay less than what you really owe. It all depends on who you borrowed from. You also probably won’t get this option right out of the gate when you begin repayment. The lender will expect you to make every attempt possible to repay what you owe first.

What happens if you don't pay your student loans? Find out here »

Tips for managing your student loan payments

Take advantage of the grace periods

If your loans have a grace period, use it to your advantage. You can take this time to explore repayment plans, consolidation options, paths to forgiveness, and more. It’s also a good time to rework your budget and make sure you can afford your payments.

Communicate, communicate, communicate

Contacting your loan officer is a good idea if you're unclear on anything regarding your student loans. But communication isn't just for questions. It's especially a good idea to contact your lender when you're having difficulty repaying your loans. Keeping them informed will make them more likely to cut you a few breaks.

Be on the lookout for letters from your lenders

All student loan servicers (lenders) are required by law to provide you with a loan repayment schedule. They should send you this summary fairly soon after you graduate, drop out or drop below half-time enrollment. This summary will outline:

• When your first payment is due
• The total number of payments you’ll make and when to make them
• The minimum monthly amount you’re required to pay

If you’re out of school and haven’t received this statement, contact your lender immediately. Don’t just assume that you don’t need to pay yet because you haven’t heard from your lender!

Set up automatic payments

Automatic payments come right out of your bank account, on time, every month. This is an especially good idea if you’re trying to qualify for Public Service Loan Forgiveness since you can’t qualify if you miss any payments.