Do You Have to Pay Student Loans While in School?

If you’re a student, you may be able to pause your loan payments while in school, but choosing to make small or interest-only payments can help reduce your debt after graduation.

Federal loans allow payment deferral, and most private lenders offer options for deferment or reduced payments. Here, we’ll explain your in-school payment choices and how they can affect your finances in the long term.

Do you have to make payments on undergraduate student loans while in school?

In most cases, you aren’t required to pay undergraduate student loans while enrolled in school. Here’s how it works for different loan types:

• Federal student loans: No payments are required while you’re in school at least half-time, and for Direct Subsidized Loans, the government covers your interest during this period.
• Private student loans: Many private lenders also offer in-school payment deferral, but interest typically accrues during this time and capitalizes if unpaid, increasing your loan balance.

How in-school interest affects your loan balance

When interest capitalizes, unpaid interest is added to your loan balance, which means you start paying interest on the new, larger balance. This can increase your total repayment amount.

Example of capitalized interest

Even a small monthly payment can make a significant difference in controlling your student loan balance. Here’s a comparison of two scenarios with an original loan balance of $5,500 at a 4.99% interest rate.

Scenario	4-year balance	Loan growth
No payments	$6,373	+$873
Pay $23/month	$5,500	$0

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Scenario 1: No payments during school

• End-of-year balance: $5,782
• Balance after 4 years: $6,373

Without any payments, your balance grows each year due to capitalized interest, adding approximately $873 to your loan over four years. This increased balance means higher monthly payments after graduation and more interest paid over the life of the loan.

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Scenario 2: $23 monthly interest-only payments

• End-of-year balance: $5,500
• Balance after 4 years: $5,500

Making a $23 monthly payment covers the accumulating interest, preventing it from adding to your balance. This approach keeps your loan balance steady at the original $5,500, so you start repayment at graduation without the extra costs of capitalized interest.

In-school payment options for student loans

Although payments aren’t required, some borrowers choose to make in-school payments to manage interest and reduce overall debt. Common options include:

• Deferred payments: This standard option allows you to postpone payments until after graduation. It’s helpful if you don’t earn income.
• Interest-only payments: Paying just the monthly interest can prevent capitalization and lower total loan costs.
• Fixed payments: Making a fixed monthly payment, like $25, keeps loan growth in check without the full interest cost.
• Full payments: Making principal-and-interest payments reduces your loan balance and shortens repayment time post-graduation.

Grace periods after leaving school

Federal and private loans offer a grace period after graduation or dropping below half-time:

Private lender	Deferred payment while in school?	Grace period after leaving school
Sallie Mae	✔	6 months
College Ave	✔	6 months
SoFi	✔	6 months

When might you need to make payments before leaving school?

Typically, you aren’t required to make payments while enrolled, but certain situations can change this:

• Dropping below half-time enrollment: If you take fewer classes, take a break, or transfer schools, your enrollment status could drop below half-time, starting your loan’s repayment clock.

Most student loans, whether federal or private, require payments when any of these happen:

• Graduation
• Leaving school
• Enrollment drops below half-time

What is a grace period?

When repayment starts, many lenders offer a six-month grace period before you must begin making payments. This grace period provides time to:

• Re-enroll if you plan to continue school
• Secure a job to help with loan payments
• Transfer to a new school or explore alternative arrangements

In some cases, such as a medical hardship, you may qualify for additional deferrals. Graduate students often have similar options for payment deferral.

Do you need to pay student loans during grad school?

Federal student loans are typically automatically deferred while you’re enrolled at least half-time in a graduate program. Many private lenders also offer deferral options for grad school, but policies vary by lender.

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Tip

Contact your private lender before enrolling to confirm its deferral policy. Knowing ahead of time helps you plan if the lender expects in-school payments.

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When does repayment start after deferring loans?

If your loan payments are deferred due to school enrollment, you’ll usually begin repayment six months after one of the following:

• Graduating
• Leaving school
• Dropping to less than half-time enrollment

While federal loans and most private loans follow these criteria, remember that each private lender sets its policies. Be sure to confirm the details with your lender to avoid surprises.

What if you choose an in-school repayment plan?

Some private lenders offer in-school repayment plans that require small, fixed payments, interest-only payments, or full principal-and-interest payments while you’re still in school.

• Private lenders: If you opt into one of these plans, payments typically begin one to two months after your loan is disbursed.
• Federal student loans: In-school repayment isn’t required, but you’re welcome to make early payments without fees or penalties. You can also prepay private loans without penalty.

• Benefit: Making in-school payments can reduce interest that would otherwise capitalize on your loan balance, helping you pay less in the long run.

Read More

Student Loans That Don’t Require Payment While in School

Should you defer your student loans while in school?

For many students, deferring payments during school makes sense, especially if income is limited. However, consider these factors:

• Loan forgiveness: Payments made while in school and during grace periods don’t count toward federal loan forgiveness programs. If forgiveness is your goal, deferral could be advantageous.
• Early repayment benefits: If you don’t plan to pursue forgiveness and have sufficient income, making early payments can help lower your borrowing costs by reducing accrued interest.

In general, deferring your student loans can help keep costs manageable during school. However, making in-school payments can ultimately reduce your total repayment amount if your budget allows.