Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Among such moves, the Department of Education has allowed a temporary interest-free suspension of all federally held student loans. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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When you take out student loans, chances are, you’re not planning on paying them back until after college.
But what do you do when the bills come due? If you aren’t prepared, you may find yourself asking “How do I pay my student loans?” But don’t feel too overwhelmed — there are many ways to handle student loan payments, including extending your grace period, making extra monthly payments (if you can afford it) and learning when it’s time to consolidate or refinance your loans.
As you get ready to begin repaying your student loans, here’s what you need to know about…
- … what to do before making your first student loan payment
- … how student loan payments are applied
- … what happens when you miss a student loan payment
- … how to report a problem with your servicer
Let’s go through a list of actions to take as you start repayment. Note that you wouldn’t do all of these things — some are mutually exclusive — but you’ll be well prepared if you’re at least aware of the following:
- Find when your grace period ends
- Find your student loan servicer
- Consider setting up a new repayment plan
- Consider consolidating your student loans
- Look into refinancing your student loans
- Set up your payment process
The good news is that, in many cases, you have a brief period of time before you have to start repaying your student debt. Known as a grace period, it gives you time to figure out your finances and set up a student loan payment plan that works for you.
The length of your grace period depends on the type of loan you have and your servicer. In general, federal student loans come with a six-month grace period, which starts from when you graduate, leave school or drop below half-time enrollment. Realize that interest accrues on unsubsidized loans during your grace period (though not on subsidized loans), as it does while you’re in school.
There are exceptions to the federal loan grace period. For example, PLUS loans enter repayment as soon as they are disbursed, so as a result, you may need to defer your payments if you aren’t prepared to begin.
However, if you’re a graduate or professional student, you will be enrolled (automatically) into a six-month deferment from your PLUS loans after graduation, or if you drop below half-time enrollment or leave school. Your loan servicer can provide you with information on deferring your PLUS loan payments.
Another exception is the Federal Perkins Loan. Even though that program is discontinued for the time being, you might still have a loan from earlier semesters. The school where you received the loan, or your current servicer, can help you determine your grace period.
Finally, if you have private loans, you’ll need to check with your servicer to find out if there’s a grace period for those. Some private lenders, like Citizens Bank, offer a six-month grace period if you defer your payments on the loans until after graduation, while others expect you to begin paying as soon as you finish school. Further, some lenders may require repayment while you attend school, so you might need to ask for a deferment if you want to wait until graduation.
|Changing your grace period|
|There are situations that can impact the length of your federal student loan grace period. Below are three circumstances that can result in changes for government student debt. (For private student loans, the policy will vary, so check with your lender.)
You can’t make a payment if you don’t know where to send the money. The federal government uses other institutions, called servicers, to manage your loan payments. In most cases, your loan servicer should contact you directly, letting you know when your first payment is due and how much you owe.
However, if you’ve applied for federal aid, your first stop online should be the U.S. Department of Education’s Federal Student Aid portal — there you can log in and learn how to pay for your loans. Make sure to sign up for a Federal Student AID ID and use it to look up your student loan information.
That said, note that a change to the line-up of student loan servicers is in the works, so your servicer may change in the near future. (Read this post for the latest information.)
Do you already know the name of your servicer, but aren’t sure how to contact them? Use this list below, provided by the Department of Education to find the contact information for your federal loan servicer.
For private student loans, you’ll need to check through your mail or email correspondence to see who is servicing your loans (if it’s not the lender itself). If you’re unsure of what private loans you’ve borrowed, you can look them up via your free credit report.
Try to keep information on your loan servicer in an easy-to-find place so you can access it quickly when needed. Many private lenders offer access to your loans and loan payment schedule via a password and ID on their website, too.
If you’re among the majority of student loan borrowers with federal student debt, there are ways to limit your monthly payment — in some cases down to $0 — via income-driven repayment (IDR).
These payment programs cap your monthly bill to a set proportion of your discretionary income. And even better, once the loan term ends, anything you still owe is often forgiven. You can check out our guide to IDR for more information, and your loan servicer should also be able to answer your questions.
Student loan payment often seems like too much because you may need to make more than one payment each month. Because of how student loans are disbursed, each year is considered a separate loan with a separate payment.
Depending on your situation, it’s possible to simplify matters through federal student loan consolidation. With this process, your loans are grouped together in a way that allows you to make only one payment each month. You can start the federal loan consolidation process by going to the Federal Student Aid website.
Because you could end up giving up the remainder of your grace period, it may make sense to apply for consolidation toward the end of your six months. Carefully review your options to decide if consolidation is the right move for you — you may even consider consulting with a financial professional.
Borrowers can consolidate private and federal student loans through refinancing. In some cases, this could lead to a lower interest rate, which in turn could save you money overall. Good credit is required for refinancing your student loans, so make sure your score is 670 or above. If you have multiple private student loans from different lenders, refinancing with one lender can help you get on top of the payments. It’s often easier to keep track if you only need to make one payment and only have one interest rate.
|Caution: What to know before refinancing a federal student loan|
Before you decide to refinance federal loans, you should consider what you can lose as a result: Namely, your access to federal benefits like IDR and Public Service Loan Forgiveness (PSLF). Refinancing makes federal loans private, and once a refinance is done, that’s the end of your federal loan options.
Weigh the benefits of a lower interest rate against the possibility that you might need income-driven repayment, PSLF or any other federal benefits later on. If you’re worried about losing access to those options, then you’ll probably want to stick with federal loan consolidation.
Deciding to refinance or consolidate during your grace period can make a lot of sense, since it sets you up to have a repayment plan in place before your first payment is due. Use your grace period to research your options and decide what could work best for you.
Now it’s time to set up your student loan payment process. If you still use checks, find out the payment address by contacting your servicer. However, chances are you may prefer to make things easy by using automatic payments.
When you receive the information from your servicer, look for directions on setting up your account for online management. You should be able to receive your statement electronically and make payments online.
Many servicers allow you to pay through their websites, or set up autopay so the money is automatically deducted from your bank account each month. In fact, many lenders offer a discount if you sign up for autopay. The discount is typically a quarter of a percentage point, and while this might not seem like huge savings, every little bit can help you pay less overall on your student loans.
If you decide to set up automatic payments through your bank or credit union, you’ll need information about your loan servicer, including the name and address, as well as your account number.
Once this information is in your financial institution’s system, you can go in once a month to pay your bill, or have your bank or credit union pay it automatically.
That said, if you elect to use autopay, be sure you’ll have enough in your account each month to cover the payment. Otherwise, you could suffer overdraft fees and hits to your credit score.
Now that you’ve made your first student loan payment, it’s a good idea to understand how your payments are applied.
First of all, if you’re in good standing, your payment goes first to the monthly interest and second toward paying down your principal. Say you have a monthly payment of $452, and your interest each month is $25. That $25 goes directly to your loan servicer, while the remaining $427 goes toward reducing your principal.
If, however, you owe fees due to late or missed payments, those are often applied even before the interest. So if you fall behind on your debt, even less of your monthly payment will go toward principal reduction. Using the example above, if your late fees and previously accrued interest add up to $250, that will come out of your payment first. Your monthly interest is then taken out of the remaining $202, leaving only $177 to reduce your principal.
Note that with IDR plans, the amount of interest that has accrued on your loan(s) may be more than your monthly payment. Per the conditions of your plan, the unpaid interest that isn’t covered gets capitalized — added to the principal balance.
However, for all plans except for Income-Contingent Repayment (ICR), the government covers some, if not all, of your remaining unpaid accrued interest. Consult your loan documents and the Federal Student Aid IDR question page to see how this subsidy would work for your specific IDR plan.
Student loan servicers automatically apply anything extra you put toward student loans to future payments. So if you decide you want to pay an extra $100 each month, it’s not going to automatically reduce your principal; you’ll instead have to ask that it be used towards your principal.
You can save money on interest and pay off your loan faster by putting extra money toward your principal payment each month. However, when you do this, you need to do it right. One of the best ways to ensure extra money goes toward actually reducing the principal on your debt is to contact your loan servicer and specify that your additional payment shouldn’t be used for future payments.
Life happens, and sometimes you just aren’t able to meet your debt obligation. Unfortunately, missing a student loan payment makes your account delinquent and can result in a lower credit score — and your student loans can go into default if you fall too far behind.
Ending up in default not only impacts your credit score, but it can also reduce your access to federal programs like PSLF and FHA mortgage loans. Wage garnishment and tax return refund withholding are two other potential consequences of federal student loan default — plus private lenders can also sue for wage garnishment.
How to avoid student loan default
If you end up in a situation where you can’t make your student loan payments, contact your federal loan servicer as quickly as possible to discuss these options:
- Deferment, which allows you to delay making payments for up to three years. You can extend your deferment if needed, up to the maximum time allowed. Your interest stops accruing on subsidized loans during deferment but continues accruing on unsubsidized loans.
- Forbearance, which can be an option if you don’t qualify for deferment, allows you to put off making payments for up to 12 months at a time, with a limit of three years in total. Interest accrues on all federal loans, except for Perkins loans, during forbearance.
- Income-driven repayment (IDR), as mentioned above, can help you reduce payment amounts so that they’re affordable. If you have a lower income, IDR can provide you with a way to continue making payments without breaking your budget. Before contacting your servicer, check out our guide to picking an IDR, so you’re educated about which plan might work best for you. Our handy calculator can also help you identify a plan likely to fit your needs.
If you have private student loans, you should get in touch with your servicer right away to look into possible solutions. Some private lenders and servicers offer hardship relief and payment plans that can help you find a more manageable payment while you work on your financial situation.
What if you’re already in default?
If you’re already in default, it’s important to contact your servicer to work on a solution. You aren’t eligible for IDR until your federal student loans are current, but your servicer can help you create a payment plan to catch up on your loan and regain good standing. When your loans are current, ask your servicer about IDR and other affordable payment options.
Complaints about student loan servicers are on the rise. Concerns about how payments are credited, as well as lack of information about federal programs and resources, are among the issues borrowers have expressed.
If you feel like your servicer is treating you unfairly, file complaints with the Consumer Financial Protection Bureau (CFPB) and the Department of Education. It’s also possible to contact a student loan ombudsman to help you resolve problems with servicers.
In the end, understanding the student loan payment process can help you be a better advocate for yourself and stay on top of the situation.
|Tips for repaying your student loans quickly|
|Need some more advice on how to repay your student loans quickly? Here are five suggestions below for fast-tracking your loans.|
Maya Dollarhide contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.99% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.48% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 1.99% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.