If you’re already repaying your student loans or about to begin making payments for the first time, it’s easy to get intimidated. Although you have lots of options to consider, there’s no reason to be alarmed. In just a few minutes, you can get a good handle on your student loans and who knows, you may even save yourself some time and money in the long run.
And REMEMBER: If you ever need any one-on-one help understanding your repayment options, you can get it (for FREE!) through your loan servicer. You should never have to pay for help with your federal student loans.
Here are six things you should know about your student loans.
1. When to start making payments
You don’t have to begin repaying most federal student loans until after you leave college or drop below half-time enrollment. Many federal student loans will even have a grace period. The grace period gives you time to get financially settled and to select your repayment plan. Note that for most loans, interest will accrue during your grace period. If you are able, you might want to consider making interest payments during your grace period so your principal balance doesn’t increase.
Your loan servicer or lender will provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment.
2. Who to pay
You will make your federal student loan payments to your loan servicer*, not the U.S. Department of Education (ED) directly. ED uses several loan servicers to handle the billing and other services on federal student loans. Your loan servicer can work with you to choose a repayment plan and can answer any questions you have about your federal student loans. It’s important to maintain contact with your loan servicer and keep your servicer informed of any changes to your mailing address, e-mail, or phone number so they know where to send correspondence and how to contact you.
3. How much to pay
Your bill will tell you how much to pay. Your payment (usually made monthly) depends on
- the type of loan you received,
- how much money you borrowed,
- the interest rate on your loan, and
- the repayment plan you choose.
You can use our repayment estimator to estimate your monthly payments under different repayment plans to determine which option is right for you. To switch repayment plans, contact your loan servicer.
4. How to Make Your Payments
TIP: Your servicer may offer the option to have your payments automatically withdrawn from your bank account each month. You may want to consider this option so you don’t forget to make your payments. And if you choose to enroll in automatic debit, you may even qualify for a special interest rate reduction.
5. What to do if you can’t make your payment
Contact your loan servicer as soon as possible if you are confused or can’t afford your monthly payment. You do have options to lower your payment, such as changing your repayment plan to one that will allow you to have a longer repayment period or to one that is based on your income. If switching repayment plans isn’t a good option for you, ask your loan servicer about loan consolidation or postponing your payments.
Note: Several third-party companies offer student loan assistance for a fee. Most of these services can be obtained for free from your loan servicer.
6. What could happen if you don’t make your payments
Not making your student loan payments is a big deal. It can result in default, which negatively impacts your credit score, and may affect your ability to borrow for things like buying a car or purchasing a home. Your tax refunds may also be withheld and applied to your outstanding student loan debt. There is never a reason to default. The Department of Education offers several options to ensure that you can successfully manage your student loans. If you’re feeling overwhelmed or having difficulty making payments, contact your loan servicer for help.
*If you are repaying federal student loans made by a private lender (before July 1, 2010), you may be required to make payments directly to that lender.
Tara Marini is a communications specialist at the Department of Education’s office of Federal Student Aid.