Student loan repayment: When to start

Congratulations to all recent college graduates! College may be over but if you are part of the $1.6 trillion borrowers with student debt, your education is not over yet. Understanding the best repayment method can be confusing and stressful. PayForED is here to help! We believe that understanding the details of repayment can save borrowers both time and money.

Let’s Continue Your Education

Student loan repayment for recent graduates has not yet started. This is because most students will take advantage of their grace period, which is the time after graduation and before repayment begins. For Direct Federal loan borrowers, the grace period is the six-month period beginning the month of their college graduation.

In some cases, it may be beneficial to start repayment before the grace period ends and not take advantage of the full grace period. To determine if you want to start repaying your student loans before the grace period is over, a borrower will need to review and evaluate the type of loans incurred and their current occupation.

For this article, we are not discussing borrowers who are going to continue their education with a post-graduate degree. The students who will be attending a post-graduate degree program may have their undergraduate federal loans remain under the in-school deferment classification. If this is your situation, I would recommend you contact the financial aid office and confirm that your current student loans qualify for deferment while attending the graduate program.

Where to start

The first step in the student loan repayment review involves the borrower taking an inventory of their student loans. What is unique about the student loan process is that the types of loans are more important than the lenders. Many student borrowers may have different loans from the same lender, which often can confuse the borrower and their repayment options.

To properly understand your student loans, the borrower needs to focus on the loan type and who is legally responsible to make the payments. Each loan needs to be classified as either a federal or private loan. For federal loans, the borrower can get their list of loans on the National Student Loan Data System ( The borrower will need their FSA ID to get access to the NSLD system. The second resource a borrower can utilize is a credit report. This source should list all your outstanding loans which could include both private and federal. By using both sources of information, a borrower should be able to create a complete inventory of all their student loans

In some cases, a student may be responsible to repay their parents for a Parent PLUS loan. The Parent PLUS loans will be listed under the parent’s FSA ID and not the student’s FSA ID. This is because these loans are legally the parent’s loans, more specifically the parent who signed the promissory note.
For private loans, contacting your lender is a good start. As stated above, obtaining a credit report will list both their federal and private loan amounts.

Reasons to Start Repayment Before the Grace Period Ends

There are two situations where starting your repayment before the grace period ends might be beneficial to the borrower. The most common situation involves the borrower who is considering using Public Service Loan Forgiveness (PSLF) to repay their student loans. The second situation would be for the borrower who is trying to avoid the additional interest charges on specific federal student loans. Depending on the type of loan, some of the student loan debt may have accrued interest during the grace period.

To qualify for Public Service Loan Forgiveness (PSLF), the borrower must be a full-time employee of an approved employer or the government. In addition to full-time employment, the person must make 120 on-time payments. If you have begun your employment and plan on using one of the PSLF repayment methods, then starting the repayment before the grace period ends can be a good strategy. Starting right away allows the borrower to start accumulating their qualifying credits toward the 120 on-time payment requirements. If they use their full grace period, they lose those few months of credit.

The Public Service Loan Forgiveness Program is available only to employees of:
• Federal, state, local, or tribal government organizations
• A 501(c)3 nonprofit
• A not-for-profit that’s not 501(c)3 designated but meets other requirements related to public service
• AmeriCorps, in a full-time capacity, or the Peace Corps

If most of the borrower’s loans are Direct Unsubsidized loans or private loans, the interest will be charged to the loan balance during the grace period.
As an example, if the student has $30,000 in loans and an average interest rate of 4.15%, a total of $620 will be added to the loan balance during the grace period. If you start repayment, this interest charge can be avoided or minimized based on the repayment method selected.

Common Exceptions

During college, you may have had to stop school for a semester or change your status from full-time student to part-time. Under the current rules, a student only gets one grace period. A student can still use the deferment option to delay their repayment if they used their grace period earlier. Many
unknowingly use their single grace period during their college career and think they have a second grace period. If you are not sure, contact your college financial aid office or your loan servicer to get clarity.

This specific situation needs to be handled correctly because this could put your student loans into default if you are under the belief that you are using your grace period when it was used during your college days.

Save Time & Money

Pay for ED does have a software solution to help many borrowers who don’t want to manually gather the inventory of all their student loans. The Pay for ED Student Loan Repayer provides the borrower with a trusted second opinion on how to properly repay their student debt. It does this by easily downloading the borrower’s loans from the NDSL system and then organizing both the borrower’s private and federal loans in one place. The Student Loan Repayer helps the borrower navigate their loan repayment options in a single view by providing the borrower a view of all 9 repayment options. The borrower is able to get a customized financial consequence scenario for each loan repayment option. It also has the unique feature of allowing couples to calculate how to best manage their combined portfolio of loans.


College funding and student loan repayment is one of the most complicated personal financial decisions a person will make. I believe it is important for the borrower to review yearly the student loans being obtained and take a review of their projected debt amount needed to finish this education. Part of this review should involve whether the grace period was utilized. Unfortunately, many borrowers don’t pay attention to this detail until after graduation.

The lack of good comprehensive college funding and loan repayment advice is currently a problem. Most personal financial planners do not understand how the financial aid and loan repayment rules intertwine. To add to this problem, college financial aid offices and loan servicers cannot legally provide personal financial advice. Become an informed consumer by taking charge and understanding the amount of money you borrowed for college and review this against your current occupation. Both are important to review for your financial future and loan strategies. Use Pay for ED as a trusted second opinion! We also have a complete list of College Funding and Student Loan Advisors (CFSLA) to help you with your questions if you feel you need further help.

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