Grace Period for Student Loans Is Ending, and Bills Are Coming Due

The repayment plans have slightly different criteria, but all can significantly lower the borrower’s monthly payments — in some cases to zero.

“There should be no federal loan borrowers in default,” said Natalia Abrams, executive director of Student Debt Crisis, a group that advocates for borrowers. The repayment options can be confusing, however, so borrowers may need to take some time for research.

“You are going to have to do some homework on your own,” Ms. Abrams said. In addition to repayment information on the Education Department’s website, Student Debt Crisis offers free help on its website.

The catch with alternative payment plans is that you may pay more over time. So borrowers should re-evaluate if their income rises and they can afford to pay more, said Will Sealy, co-founder and chief executive of Summer, a start-up that aims to work with colleges and employers to help borrowers manage their student loans.

If you’re having trouble making payments, Ms. Cheng said, don’t ignore communications from your loan servicer. Even though it may feel awkward to talk about your situation, she said, it’s better to discuss alternatives than risk a default.

Here are some questions and answers about student loans:

Should I refinance my federal loans with private loans with lower interest rates?

Advocates for student borrowers urge caution about refinancing federal loans, which carry guaranteed consumer protections, like the right to postpone payments because of financial hardship and options for getting back on track if you default. Some private loans may offer initially lower interest rates, but they are often variable-rate loans, so payments can increase significantly when rates rise.

What should I do about interest that has accumulated during the grace period?

Consider paying it off in a lump sum if you can afford it, Mr. Sealy said. With many student loans, you don’t have to make payments during the grace period, but interest still accrues. If you don’t pay it off before formally entering repayment, that interest is added to your loan balance, meaning you’ll end up paying interest on the interest, adding to your total debt.

Can I reduce my interest rate with automatic loan payments?

Yes. Signing up for automatic deduction of your loan payments can help you avoid late fees and can qualify you for a small reduction — 0.25 percentage points — in your interest rate, saving a bit of money.