When Do You Have to Start Paying Back Your Student Loans?

When Do You Have to Start Paying Back Your Student Loans?

BIG Ideas:

  • Paying back student loans on time can help you build the credit score you need to qualify for other loans.
  • Your loan repayment schedule will depend on the type of loan (federal vs. private), your repayment term, and the lender.
  • The repayment option you choose may affect your payments and the amount of interest you pay on your loan.

College is enlightening, exciting, and of course, fun. It’s also a big step toward full-blown adulthood. When you graduate, you’ll be on the path to a career, financial security and independence.

If you’ve borrowed money to pay for school, part of that independence will involve paying back your student loans.

Sure, nobody likes owing money, but paying back your student loans on time can help you build the solid credit score you’ll need to achieve your goals later in life, like buying a car or a home.

The first rule about paying back your loans is understanding when they are due. That will depend on the type of loan(s) you have (federal vs. private), the repayment period, and the lender. Read on to learn more.

Paying back federal loans

If you have a federal loan, which is a loan from the United States government, it will enter repayment when you graduate, enroll below half-time status, or leave school.

Some important things to know:

  • With direct subsidized and unsubsidized loans, you’ll be given a grace period of six months after you graduate to start making payments.

    With both subsidized and unsubsidized loans, interest will be charged on the money you borrow while in school, however, with a direct subsidized loan, the government will pay the interest while you’re in school. With a direct unsubsidized loan, however, interest will accrue while you’re in school and will be added to your loan balance.
  • When your loan enters repayment, you’ll be assigned the Standard Repayment Plan, which is a 10-year Fixed Payment Repayment Plan. Your interest rate will be fixed, so your monthly payments will stay the same every month.
  • There are also other Fixed Payment Repayment Plans, which base your monthly payment amount on how much you owe, your interest rate and a fixed repayment term.

    For example, you could choose a Graduated Repayment Plan, where your payments start lower and gradually increase as your income rises. Or if you’re eligible, you could enroll in an Extended Payment Plan, where your payments are fixed or graduated over a longer period (up to 25 years), helping you keep your monthly payments lower.
  • In addition to Fixed Payment Repayment Plans, you may be eligible for, where your payments are based on your income or family size.

Other important things to know about repaying federal loans:

  • With all federal loans, your loan servicer will provide a repayment schedule that tells you when your first payment is due and the number, amount, and frequency of your payments.

Paying back private loans

With a private student loan, which is a loan from a bank, credit union, or other private lender (like Brazos!), you must choose the repayment option when you apply, since you cannot change it . The type of repayment plans available to you will depend on your lender, so make sure you understand your options.

If you have a private student loan with Brazos, you have three repayment choices:

  •  Immediate repayment. You make principal and interest payments while you’re in school. Immediate repayment is optimal if you want to lower the amount of interest you have to pay. Just keep in mind that you’ll need income or money saved to make those payments in school.
  •  Interest-only repayment. With this option, you pay only the interest on your loans while in school. Again, this will help you reduce the interest you pay over the life of your loan.
  • Deferred repayment. With deferred repayment, you won’t have to make payments until after graduation (when the grace period ends) or if you drop below half-time status or leave school. You will, however, end up paying more in interest over the life of the loan and the interest that accrued while you were in school will be capitalized which will add to the principal balance of your loan.

Smart ways to manage your loans

Whether you have federal loans, private loans, or both, it’s important to take these key steps:

  • Contact your loan service/lender to get the repayment schedule so you know when your loans are due.
  • If you’re having difficulty making payments, contact your loan servicer/lender immediately.
  • Create a monthly budget to ensure you have the money to make your payments.
  • Depending on your interest rate, you could refinance your student loans to a private loan to help you save money, pay off your loans sooner, or lower your monthly payments.

Brazos is here to make student loan payments affordable

For more than 40 years, Brazos Higher Education has been helping make education more affordable for students. As a Texas non-profit, we offer great rates and no fees on private student loans that let you refinance higher-interest debt and save. Contact us to learn more.