Do You Pay Student Loans While in School? Here’s What to Know

Paying for college often means taking out student loans, but many borrowers are unsure if payments are required while they’re still in school. Whether payments are necessary depends on the type of loan, enrollment status, and financial choices. Understanding these factors can help manage debt effectively and reduce long-term costs.

Interest Accrual for Unsubsidized Loans

Unsubsidized student loans begin accruing interest as soon as they are disbursed. Unlike subsidized loans, where the government covers interest while the borrower is enrolled at least half-time, unsubsidized loans place the full responsibility on the student. If no payments are made during school, the loan balance grows due to interest capitalization.

For example, a $10,000 unsubsidized loan with a 5.5% interest rate accrues about $550 in interest annually. After four years, the added interest would total around $2,200. When repayment begins, this interest is capitalized, increasing the principal balance and the total repayment cost.

Some borrowers make interest-only payments while in school to prevent capitalization. Even small contributions can reduce long-term costs. Paying $50 per month toward interest on a $10,000 loan could prevent hundreds of dollars from being added to the principal. Federal loan servicers allow voluntary payments, and some private lenders offer similar options.

Grace Period Clarifications

Most federal student loans provide a six-month grace period after graduation, leaving school, or dropping below half-time enrollment before repayment begins. This allows time to secure employment and adjust financially. Private loans vary—some require immediate payments, while others offer a similar grace period.

For unsubsidized federal loans and most private loans, interest continues to accrue during the grace period. If unpaid, this interest is capitalized when repayment begins, increasing the loan balance. Borrowers who can afford payments during this time, even if only toward interest, can reduce overall costs.

If a borrower re-enrolls at least half-time before the grace period ends, federal loans typically reset the grace period, delaying repayment. However, if the full grace period is used and the borrower later returns to school, they may not receive another grace period upon leaving again. This is important for those considering graduate school or taking a break between degree programs.

In-School Payment Arrangements

Students who want to reduce their loan burden can set up voluntary payment plans while still enrolled. Federal loan servicers and private lenders typically allow fixed monthly payments, interest-only contributions, or full principal and interest payments. These arrangements help prevent debt from growing before mandatory repayment begins.

Some private lenders offer incentives for in-school payments, such as reduced interest rates or waived fees. Some require a minimum fixed payment—often as low as $25 per month—while the borrower is in school. These small payments add up over time and reduce accrued interest.

Automatic payments can also provide savings. Federal loan servicers and many private lenders offer a 0.25% interest rate reduction for borrowers who enroll in autopay. While a small percentage, this discount can lead to substantial interest savings over the life of the loan, especially for those with high balances.

Deferment and Forbearance

Borrowers facing financial difficulties while in school or after leaving may be able to pause loan payments through deferment or forbearance. These options differ in how they handle interest and eligibility, making it important to understand their long-term effects.

Deferment is typically the better option for those who qualify, as certain federal loans, such as Direct Subsidized Loans and Perkins Loans, do not accrue interest during the deferment period. Eligibility criteria include economic hardship, enrollment in a graduate fellowship program, or active-duty military service. Borrowers in programs like the Peace Corps may also qualify. Private lenders rarely offer deferment, and when they do, interest almost always continues to accrue.

Forbearance is easier to obtain but comes with greater financial consequences. Unlike deferment, interest accrues on all loans during forbearance, including subsidized federal loans. There are two types: general forbearance, which is granted at the loan servicer’s discretion for reasons such as medical expenses or job loss, and mandatory forbearance, which servicers must approve under specific conditions, such as participation in a medical or dental residency program.

Enrollment Status Changes

A student’s enrollment status affects loan repayment obligations, and changes can trigger unexpected financial consequences. Dropping below half-time enrollment, withdrawing from school, or graduating all impact when payments begin and whether deferment or grace periods still apply.

For students who drop below half-time enrollment, federal loans typically enter their grace period, if available. If the borrower has already used their grace period, repayment begins immediately. Private loans may have different policies, with some lenders requiring immediate payments once enrollment falls below a certain threshold. Borrowers considering reducing their course load should check with their loan servicer to determine how it will affect their repayment timeline.

Withdrawing from school entirely can accelerate repayment obligations. Federal loan servicers verify enrollment status, and if a borrower is no longer enrolled, they may receive a notice that their grace period has started or ended. Those planning to return to school should be aware that once a grace period is exhausted, it does not reset. This is particularly relevant for students taking a temporary leave of absence, as they may find themselves required to start making payments sooner than expected.