So, you just received an email about your first student loan bill and need to make a payment? Don’t panic. Student loan payments are not as big and bad as they seem … if you’re prepared for them.
If you’re facing your first student loan payment due date and have no idea how to make a payment – or you don’t know if you can even afford a payment – this guide is for you.
Where did this student loan bill come from?
For the first six months after you graduate, your student loans are in a six-month grace period. That means you won’t have to make any payments. When that grace period ends, it’s time to start paying back your loans.
Here is an example from the FedLoan Servicing (PHEAA) website.
Get to know your loan servicer
The loan servicer is the company you will pay each month. The government has contracts with nine different loan servicers. You may have all of your loans with one servicer or several.
The servicer handles all of the billing and services associated with your loan, such as alternative repayment and consolidation. They can also give you general information about how, when, and how much to pay each payment period.
You can find out who your loan servicer is by creating an account or logging in to the federal student aid site. When you’re logged in, you’ll have access to information about your loan servicer and how to contact them.
It’s important to understand who they are and how to get in contact with your servicer. Be sure you sign up for electronic notices and add their email to your “safe” list so your important correspondence won’t wind up in your spam filter. Maintaining a good relationship with your servicer by responding to emails, letters, and calls from them and making each payment on time is helpful in the event that your circumstances change and you need to ask for deferment or forbearance.
Making your first payment
All of the loan servicers allow you to make payments online, by mail, or over the phone. Some servicers, such as Great Lakes, FedLoan Servicing, and Nelnet, even let you pay with a mobile app. You can go to your loan servicer’s website and create an account with them to find your payment options. The amount you pay will vary depending on the principle, length, interest rate, and the repayment plan that you choose.
BONUS: Many servicers offer up to .25% off of your loans’ interest when you set up automatic payments.
How much should I pay each month?
You should at least make your minimum payment, if you can. Many people will have multiple loans to repay, and you should at least meet the minimum payment for each loan. If you miss a payment, you will badly damage your credit score. That can make it difficult to get approved for new credit, get an auto loan, or even be approved to rent an apartment.
When is my bill due?
Your due date will be on your first bill statement. Lenders often allow borrowers to choose a due date that better suits their finances.
Should I pay more than I owe?
The quicker you pay back your loan, the less you will pay in interest charges. Use this tool to see how making larger or smaller monthly payments will impact the cost of your loan. You can make larger payments if you want to pay off your loan faster, but make sure you have paid off expensive debt like credit card debt first. Credit card debt likely has a much higher interest rate than your federal student loan debt, and it doesn’t come with all the flexible repayment perks as your student loans.
If you have extra cash on hand — after you have met your minimum payment requirement, you've met all of your other debt obligations, and you've set aside cash for savings — it could be wise to put it towards your student loan debt.
Target the loan that has the highest interest rate with extra payments you make. As pictured on PHEAA's site below, you can specify exactly which loan you would like to pay. Speak to your servicer before you make extra payments so that your extra birthday money or cash from your tax refund doesn't go toward the accrued interest for your other loans. Tell them the money is not intended to be put toward future payments, but toward the principal of the specified loan.
What if I can’t afford my payment?
Don’t avoid your loan servicer because you can’t afford the monthly payment. You have options.
Standard repayment plans for federal student loans are set up to last a period of ten years. If you can’t afford your payments, you might be eligible for a longer income-based repayment plan that will give you a longer period to pay back your loans and reduce your monthly payment amount. Enrolling in an income-based plan can reduce your payments to as low as $0 per month. If you are an employee in the public or nonprofit sector, you may qualify for public service loan forgiveness. The program allows your balance to be forgiven after making 120 consecutive payments.
Find out more about all the different types of repayment plans here.
If you have private student loans, the federal programs will not be available to you. Your best bet is to either refinance your debt at a lower interest rate or call your lender to see if you can work out a more affordable payment.
What if I miss a payment?
Your loan will be considered delinquent if you don’t make a payment by the due date. It stays delinquent until you make up the missed payments. The loan will go into default if you go more than 270 days (9 months) without making a payment. If the loan goes into default, you may face some pretty stiff consequences, including wage garnishment. Wage garnishment allows your lender or debt collector to take a portion of your paycheck automatically every pay period.
A last resort: deferment and forbearance
If none of those payment options work for your situation, you can ask your servicer about delaying payments by placing your loans in deferment or forbearance.
If you are having a hard time making your loan payment each month, you can ask your servicer to put the loan in deferment status. Deferment allows you to delay making a payment on your loan for up to three years, or longer if you’re actively serving in the military. If you have a subsidized loan or a federal Perkins Loan, the government will cover your interest payments during deferment. If you have an unsubsidized loan, your interest will continue to accrue.
You can apply for forbearance if you don’t qualify for deferment. Forbearance allows you to delay or cut down the amount of your loan payments for up to one year. The interest will still accrue on your loans, but you’ll get a break from paying each month. There are two types of forbearances: mandatory and discretionary.
You’ll need to keep making payments on your loans until your servicer grants your request for deferment or forbearance. If you stop making payments before deferment or forbearance is approved, your loans will become delinquent and you might default on them.
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