Do I Have to Pay My Student Loans While in School?

Many individuals pursuing higher education often have questions about their student loan repayment responsibilities while actively enrolled in school. It is a common concern whether loan payments are immediately due upon receiving funds or if there are provisions that allow for a temporary pause in repayment. Understanding the different phases of student loan status related to enrollment can help borrowers manage their financial obligations effectively.

In-School Deferment Eligibility

In-school deferment allows borrowers to temporarily postpone payments on their student loans while they are enrolled in an eligible educational program. This provision is designed to alleviate financial pressure, enabling students to focus on their studies without the immediate burden of loan repayment. For federal student loans, this deferment applies automatically when a borrower is enrolled at least half-time at an accredited institution. The school generally reports enrollment status directly to the loan servicer, triggering the deferment.

If the deferment does not apply automatically, borrowers may need to contact their loan servicer or submit an in-school deferment request form. This form usually requires certification of enrollment from the educational institution. Private student loans also offer in-school deferment, though their terms and conditions can vary by lender. Some private lenders may require immediate payments regardless of enrollment status, while others offer deferment options similar to federal loans, often requiring an application from the borrower.

This period of deferred payment continues as long as the student maintains the required enrollment status. If a student drops below half-time enrollment or withdraws from school, the in-school deferment will cease.

Grace Periods and Repayment Commencement

After a student graduates, withdraws from school, or drops below half-time enrollment, a grace period begins before loan repayment becomes mandatory. This grace period provides a transitional phase, allowing borrowers time to prepare for their upcoming financial obligations. For most federal student loans, the grace period is six months. Private student loan grace periods can vary, with some lenders offering similar six-month periods, shorter durations, or no grace period at all, requiring immediate repayment.

During this grace period, borrowers are not required to make any payments on their loans. Once the grace period concludes, the loan enters repayment, and monthly payments become mandatory according to the terms of the promissory note. If a borrower previously used a grace period, for example, after an earlier withdrawal from school, they may not be entitled to a full new grace period upon re-enrollment and subsequent departure. This can lead to repayment beginning sooner than anticipated.

Understanding Interest and Voluntary Payments

While payments may not be required during in-school deferment or grace periods, interest continues to accrue on certain types of student loans. For unsubsidized federal student loans and most private student loans, interest accumulates during these periods, increasing the total loan amount. This accrued interest capitalizes, meaning it is added to the principal balance, when repayment begins.

Conversely, for subsidized federal student loans, the government pays the interest during periods of in-school deferment and grace periods. This prevents the loan balance from growing while the borrower is not required to make payments.

Borrowers have the option to make voluntary payments during deferment or grace periods. Making interest-only payments or principal and interest payments during these times can reduce the total amount of interest paid over the life of the loan. To make such payments, borrowers contact their loan servicer or utilize online payment portals, specifying that the payment should be applied to the principal balance if possible.