If you’re getting ready to graduate and you’ve taken out a student loan (or several), it’s time to start thinking about paying them back. Here’s everything you need to know about grace periods, payment schedules, and more for both federal and private loans.
Paying Off Federal Loans: Stafford & Perkins
The most common student loans, federally funded loans—including Stafford, Perkins, and PLUS loans—give you a grace period after you leave school to start repaying. In the world of federal loans, “leaving school” means withdrawing from classes (whether you have your degree or not), going to school less than half time, or graduating.
Here’s how long you have to start making payments:
Stafford Loan—You’ll have a six-month grace period.
Perkins Loan—You’ll have nine months.
PLUS Loan—If your parents have taken out a PLUS loan, they can either start paying it off while you’re in school or defer it until you leave school. (Even if they choose to defer the loan, interest will start accruing as soon as they take out the loan.)
When the grace period ends, you’ll start getting monthly bills from a loan servicer. Usually, you’ll have 120 months (10 years) to pay back the loan and you’ll make a separate payment for each loan if you have more than one.
To pay your loans back sooner, consolidate multiple loans into one (usually smaller) payment, or work out a payment schedule that better fits your income or occupation, you’ll need to talk to your loan servicer(s).
What is a Loan Servicer?
Government loans are made by the Department of Education (DOE), but, for most student loans, billing, collection, and day-to-day administration is handled by loan servicers like Sallie Mae.
What does this mean for you? You’ll have a loan servicer sending you bills, collecting your payments, and most importantly, there to answer any questions you might have.
Not sure who your servicer is? They should have sent you a letter when your loan was originally approved. If you misplaced the letter, visit the National Student Loan Data System, click Financial Aid Review, and enter your information to find out. (If you have multiple loans, you might have multiple servicers.)
Finding out What You Owe
To see what you owe so far, check out the Federal Student Aid - Student Loans website. They have a handy estimator that can help.
Having Trouble with Your Payments?
If you have too much debt, you’ve lost your job, you’re moving across the country, or you have an unexpected expense that wipes out your savings, contact your loan servicer(s) right away.
In some cases, they can suspend your payments temporarily, keeping your loan current and helping to keep your credit score high (which will help you in the future as you apply for credit cards, buy your first house, and so on).
Defaulting on a Government Loan
If you miss 11 months of payments (and you haven’t deferred or worked something out with your servicer), your loan will go into default, which could mean:
Garnishment of your wages and/or tax refunds
An additional collection fee of up to 18.5% of your defaulted balance
Poor credit scores and problems with future loans and credit card applications
Legal action against you and any assets you have, such as a home or car
If you think you’re in danger of defaulting (or have already defaulted), contact your servicer immediately. The quicker you contact them, the quicker you can resolve the default and the fewer consequences you’ll face.
Paying off Private Loans
Private loans, granted to you by private banks or other lending institutions, have varying payment schedules, interest payments, and deferral options. For detailed information on paying back your private loan, please contact the lending institution.