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The Debt Ceiling Bill signed into law in June 2023 finally brought an end to the federal student loan payment pause, with payments resuming on October 1, 2023 (and interest accrual resuming a month earlier). The result is that millions of federal student loan borrowers — at least, those not taking advantage of the student loan “on-ramp” — will need to begin making minimum payments again as of October 1. However, some borrowers may opt to make more than the student loan minimum payment so that they can expedite the repayment process on their loan.

What Is the Minimum Payment on Student Loans?

The minimum payment on student loans is the lowest amount of money a borrower can pay each month. The actual student loan minimum payment amount owed each month might be determined by factors including the loan type, interest rate, and the repayment plan. Generally, the minimum monthly payment includes the principal (the original amount borrowed), interest, and fees.

For federal student loans, the minimum monthly payment depends on the repayment plan a borrower is on, as follows:

Standard Repayment Plan: On this plan, your payments are a fixed minimum amount of at least $50 a month, and your loans are paid off within 10 years.

Saving on a Valuable Education (SAVE) Plan: With SAVE, a new income-driven repayment (IDR) plan introduced by President Biden in late June 2023, borrowers with undergraduate federal student loans will get the lowest monthly payments of any IDR plan. For those who are single and make $32,800 a year or less and for families of four who make $67,000 or less annually, the minimum monthly payment is $0 (meaning they owe no loan payment). Those who earn more than those amounts will save at least $1,000 a year on the SAVE plan compared to current IDR plans.

Pay As You Earn (PAYE) Plan: Under the PAYE plan, borrowers’ payments are 10% of their discretionary income and are also based on their family size. With PAYE, their payment could be as low as $0 per month, and they won’t owe more monthly than they would have on the Standard Repayment Plan.

Income-Based Repayment Plan: Borrowers on this plan need to have a high debt-to-income ratio in order to be eligible. Their monthly payments will be 10% to 15% of their discretionary income, and could be as low as $0. Borrowers won’t owe more monthly than they would have paid on the Standard Plan.

Income-Contingent Repayment Plan: Borrowers with Direct loans who are eligible for this plan will have monthly payments that are the lesser of 20 percent of their discretionary income or the amount they would pay on a fixed repayment plan over 12 years, adjusted for their income. Their payments may be as low as $0 a month.

Graduated Repayment Plan: With this plan, a borrower’s monthly payments are lower at first and then increase, usually every two years. The monthly amounts they will pay will be enough to repay their loans within 10 years.

Extended Repayment Plan: For those on the Extended plan, their payments may be fixed or graduated, and the amount they pay each month will be enough to ensure their loans are paid off in 25 years. Their payments will be lower on this plan than they would be on the Standard or Graduated plans.

You can use the Federal Student Aid’s Loan Simulator to help calculate how much you’ll owe and find the best repayment plan option for your situation.

Can I Pay More Than The Minimum on Student Loans?

It’s possible to make more than the minimum payment on student loans without being charged for any prepayment penalty fees. Both federal student loans and private student loans are required to allow borrowers to make extra payments and pay off their loan early without charging any additional fees.

Making extra payments can help decrease the interest paid and help reduce the overall cost of the loan. Typically, you can contact your lender to specify that the extra payment be applied to your highest interest loan and be applied to the principal value of the loan.

Making payments directly to the principal value of the loan can help speed up repayment. And, because most student loan interest is charged per day, making additional payments on the principal value of the loan can help reduce the amount you pay in interest over the life of the loan.


💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Why Would You Pay off Your Student Debt Sooner?

As with any debt, a primary motive for paying off student debt early is to more quickly remove debt that’s racking up interest. Prioritizing debt repayment could help lower your debt to income ratio and could help you reduce the amount of money you owe in interest over the life of the loan. Here are a few reasons you may want to pay off your student loans sooner rather than later.

Interest. Interest. Interest.

Interest continues to accrue for the life of most student loans. (Note: The timetable of when interest starts to accrue on your student loans depends on the type of student loans you’ve been awarded. Contact your lender for all the details.) The sooner you pay off your loans, the sooner you stop interest from accruing.

Student loan interest does qualify for a tax deduction. But only $2,500 of the interest can be deducted each year — less if your modified adjusted gross income is greater than $70,000 a year.

Your Debt-to-Income Ratio May Be Lowered

When borrowing a mortgage or a car loan, the lender will usually consider the applicant’s debt-to-income ratio. And the lower it is, the better it looks from a financial perspective. Do you need a new car? Want to buy a house? Start a family? The sooner you get your student loan debt paid off, the more money you will likely have to put toward those dreams being realized.

Your Credit Score Could Strengthen

Your FICO® credit score is a powerful component of your total financial picture; tend it like a garden, and it could grow. There’s something to be said for the fact that if you’re managing an open debt responsibly by making on-time payments, that may have a positive impact on your credit score. And a higher FICO® score can help you get a better interest rate on a loan you might need for a home or car.

It’s Easier to Save Money When You’re Not Paying Down Debt

The conventional wisdom is the less debt you have, the more money you likely have to save. Think of successfully managing and paying off debt as a necessary exercise routine, like working your core. As your financial “core” gets stronger, you’re likely to become better able to balance your finances and save more money.

When you’ve repaid your student loans, the money you were spending each month on loan payments can instead be used to help you reach financial goals like starting an emergency fund, saving for a down payment on a house, or more.


💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

How to Accelerate Your Student Loan Payments

You may be able to pay off your student loan debt more quickly by setting reasonable goals, including payments larger than the student loan repayment minimum required. As mentioned, both federal and private student loans generally allow for penalty-free prepayment but be sure to contact your loan provider before doing so to ensure your prepayments are being applied in the way that you want them to be. Here is a checklist that may help you eliminate your student loan debt sooner.

Calculating Your Costs

Make a list or spreadsheet of all your student loans. You can use a student loan calculator to help determine how much you ultimately owe (including interest) and when, ideally, you’d like to complete your student loan payments.

Making a Budget

Track your spending and make a realistic budget of your monthly and annual expenses. And leave some wiggle room for unexpected expenditures. Be honest with yourself. If you feel you’re spending too much on unnecessary expenses, maybe it’s time to skip your next urge to splurge.

Setting Manageable Goals

Now that you know how much money you have coming in and where it’s going, it might be time to make some uncomfortable, but fair, spending decisions with the intention of eliminating your student loans by your goal date. That means you may want to sacrifice some unnecessary expenses. Cutting back on non-necessities isn’t fun, but it may make it easier for you to save.

Paying Beyond the Minimum Required

As we mentioned, you can accelerate your loan payoff by paying more than the minimum student loan payment required by your loan provider. It’s okay to start small — even an extra $25 a month can start to add up. Paying more each month can also save you money on interest. You can ask your loan provider to put that extra cash toward the principal.

Avoiding Late Fees

An easy way to help ensure you pay at the same time every month is to set up an auto-draft from your checking or savings account. Some lenders may even offer a rate discount to student loan borrowers who enroll in automatic payments.

Maximizing “Surprise” Money

Are you doing so well at work that you got a raise or bonus? Rather than splurging on something new, lighten the burden of your current reality by putting that money toward your student loan debt.

Finding Extra Work

Every little bit of extra income can help. A part-time job could get you closer to your goal more quickly. If fitting in an extra 15 or 20 scheduled hours a week isn’t feasible, try finding a side hustle where you can make your own hours. You can work as a dog walker, become a rideshare driver, or even recharge electric scooters — all through an app.

Recommended: What is the Average Student Loan Debt After College?

Refinancing Your Student Loans

Refinancing your student loans might offer yet another step closer to your goal. Student loan refinancing is when you borrow a new loan (which is used to pay off your original loans) at a new interest rate and/or a new loan term.

One potential benefit of refinancing is the possibility of securing a lower interest rate. You could also potentially shorten your loan repayment term. But opting to shorten your loan term generally means paying more each month.

If you have a combination of private and federal loans, it’s possible to roll them into a single refinanced loan, which means having one monthly payment instead of multiple payments to multiple lenders. This is what is known as loan consolidation.

However, it’s very important to understand that by refinancing your federal loans, you lose federal student loan protections such as deferment and forbearance, and access to income-driven repayment programs. Take this into very careful consideration before moving forward with student loan refinancing with a private lender.

The Takeaway

Making more than the minimum student loan payments each month can help borrowers speed up their loan repayment and spend less in interest over the life of their loan. Lenders generally do not charge any fees for prepayment. To make the most of your extra payments, contact your lender to be sure they are being made to the principal value of the loan.

Refinancing could be another option for some borrowers to consider if they are interested in securing a lower interest rate on their loan — and provided that they don’t need access to federal programs or protections.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What happens if I only pay the minimum on my student loans?

Making the minimum monthly payments on your student loan will generally result in your loan being paid off according to the original terms of the loan.

Is it worth paying off student loans early?

Paying off student loans ahead of schedule can make borrowing less expensive, because the borrower will likely spend less in interest over the life of the loan. Repaying student loans early could also have benefits like improving an individual’s debt-to-income ratio. Without the burden of student loans, borrowers might also be able to focus on other financial goals.

What is the average minimum student loan payment?

A borrower’s average monthly minimum federal student loan payment depends on factors including the total amount they owe, their interest rate, and the type of payment plan they’re enrolled in. For instance, on the Standard Repayment Plan, your payments are a fixed minimum amount of at least $50 a month.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If your student loan payments seem overwhelming, you’re not alone. U.S. borrowers owe a combined $1.77 trillion in student loan debt, and one in ten Americans has defaulted on a student loan, according to the Education Data Initiative.

And now, for the first time in a long time, many student loan borrowers are faced with making payments again. The reason: The end of the three-year pause on federal student loan payments, which requires interest accrual to resume on September 1, 2023 and payments to resume on October 1, 2023. This resumption in federal student loan payments was part of the debt ceiling bill that President Biden signed into law in early June 2023.

In addition, the Supreme Court’s ruling against the President’s plan to forgive up to $20,000 in federal student loan debt means that student loan borrowers who may have been hoping for that forgiveness now don’t have that option.

You may be thinking, I haven’t paid my student loans in years – do I really have to start now? What happens if I just don’t pay?

The answer is that borrowers do indeed have to start paying their student loans again, and simply not paying can have consequences. Late or missed “delinquent” payments can make it harder to get a credit card, car loan, or apartment lease. And if you default on a loan, the balance of the loan will become immediately due, your wages may be garnished, and your tax refund can be withheld, among other serious consequences.

There are several options that can help you avoid defaulting on your student loan, such as deferment, forbearance, and income-driven repayment plans. Here’s what to know before you stop making payments on your student loans.

Do Student Loans Ever Go Away?

The short answer to the question of do student loans ever go away? is no, unless you’re part of the Public Service Loan Forgiveness Program. Unlike other forms of debt, such as home and auto loans, student loans generally cannot be discharged during bankruptcy. Borrowers are still required to repay student loans even if they don’t graduate or are struggling to find a job.

So what happens if you don’t pay student loans? In addition to the interest that accrues over time and increases in the amount you owe, failing to repay a student loan on time can result in additional fees if your debt gets moved into collections.

Because on-time payments account for a portion of a borrower’s credit score, failing to make payments can negatively impact a person’s credit score. Having a low credit score can impact your ability to get a mortgage, car loan, credit card, or apartment lease.

If you default on federal student loans, the government can take your tax refund or up to 15% of your wages. You can also be sued, though this is more common with private loans.


💡 Quick Tip: Often, the main goal of refinancing student loans is to lower the interest rate — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Is There a Student Loan Statute of Limitations?

There is no statute of limitations for federal student loans. That means you can be sued at any point for not paying your loans.

There is a statute of limitations for private student loans, which is set by individual states and generally ranges from three to 10 years. But even this limit just means the lender can’t sue you anymore — it doesn’t mean the loan goes away or they stop trying to collect what is owed.

Is Getting Out of Paying Student Loans Possible?

There are options that allow borrowers to temporarily stop making student loan payments. Here’s what happens if you don’t pay your student loans because you’ve been approved for one of these plans.

Relief for Federal Student Loans

If you have federal student loans, the end of the federal payment pause requires payments to resume on October 1, 2023. To help borrowers, the Department of Education is launching a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Federal student loan borrowers can also temporarily pause payments by requesting a deferment or forbearance. You might qualify if you’re still in school at least part-time, unable to find a full-time job, facing high medical expenses, or dealing with another financial hardship. The type of loan held by the borrower will determine whether they can apply for a deferment or forbearance.

Federal student loans can be deferred for up to three years. There are two types of forbearance; general and mandatory. Borrowers facing financial difficulties can request a general forbearance, and their loan servicer determines whether they qualify. General forbearance is awarded in 12-month increments and can be extended for a total of three years.

You can temporarily pause payments on your federal loans by requesting a deferment or forbearance.

Loan servicers are required to award qualifying borrowers a mandatory forbearance. Qualifications include participating in AmeriCorps, National Guard duty, or medical or dental residency. The Federal Student Aid website has a full list of criteria for mandatory forbearance. Mandatory forbearances are also granted in 12-month increments but can be extended so long as the borrower still meets the criteria to qualify for mandatory forbearance.

Borrowers who enroll in an income-based repayment plan can qualify to have their loan balance forgiven after a certain amount of time; the amount of time depends on the plan. (Keep in mind, you’d still have to pay taxes on the amount forgiven.)

For instance, under President Biden’s new SAVE Plan, which is based on income and family size, qualifying federal student loan borrowers with undergraduate federal loans can get their monthly payments reduced by half — from 10% to 5% of their discretionary income.

In rare cases, certain loans can be canceled or discharged, if your school closes while you’re enrolled or you are permanently disabled. For obvious reasons, these aren’t options to count on, so you can assume your loans will be sticking with you.


💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

Consequences of Defaulting on Your Student Loans

As mentioned earlier, what happens when you stop paying student loans is that the loan is at risk of going into default. The national default rate was 2.3% for fiscal year 2019 (the most recent year for which numbers are available), according to the U.S. Department of Education. (Because of the pause on federal student loans payments during the pandemic, the default rate dropped significantly from 7.3% in 2018.)

There are serious financial repercussions for defaulting on a student loan.

For federal student loans, if a borrower fails to make payments for more than 270 days on a loan from the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, the loan will go into default. (For loans made under the Federal Perkins Loan Program, the loan can be declared in default after the first missed payment.)

At this point, the balance of your loan becomes due immediately through a process called “acceleration.” You’ll also lose eligibility for federal programs such as deferment, forbearance, income-driven repayment plays, and additional federal aid.

Recommended: Student Loan Refinancing Guide

Your wages may be garnished (meaning that your employer may be required to hold back a portion of your paycheck) and any tax refunds or federal benefit payments may be withheld.

Defaulting on a student loan will damage your credit rating and you may not be able to buy or sell certain assets, such as real estate. If your loan holder sues you, you may also be charged related expenses such as attorney fees.

Temporary Relief for Private Student Loans

Private lenders sometimes offer relief like forbearance when you’re dealing with financial hardship, but they aren’t required to. If you have a private student loan, check with your lender directly to see what temporary relief programs or policies they may have.

Private student loans generally go into default after 90 days. Private lenders may also take you to court or use collection agencies to collect your student loan debt. Whether you have federal or private student loans, contact your loan servicer immediately if your loan is delinquent so you can understand what options are available to you before your loan goes into default.

Recommended: Should You Refinance Your Student Loans?

The Takeaway

Because student loans don’t disappear, it’s important to stay on top of payments, especially with federal student loan payments resuming on October 1, 2023. Borrowers with federal student loans may be able to take advantage of the Department of Education’s 12-month on-ramp to repayment until September 30, 2024. Or they might qualify for deferment, forbearance, or income-based repayment options which can provide some temporary relief or help make monthly payments more manageable.

Options available for borrowers facing financial hardships with private student loans vary by lender.

For some borrowers, student loan refinancing may be a way to lower interest rates, reduce monthly payments, and combine all your loans into a single monthly payment. Reducing monthly student loan payments by extending the life of the loan may result in more interest over the life of the loan. If you qualify for a lower interest rate, you could save money over the life of the loan.

It’s also possible to refinance both federal or private loans, or a combination of the two. However, it’s very important to understand that if you refinance federal loans, you’ll lose access to federal benefits and protections, including deferment, forbearance, income-driven repayment, and loan forgiveness for public service, so it’s not recommended for borrowers who are planning to take advantage of those programs.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.