How to Make Your Student Loan Payments On Time, All The Time

Renee Layberry
May 4, 2021

Paying all of your bills on time, including your student loan bills, improves your all-important credit score.   Missed payments will lower your credit rating. That can prevent you from renting an apartment, getting a job, or someday securing a loan to buy a house.    When you start paying your student loans after graduation, you might be concerned about your ability to pay them on time every month. With smart budgeting and thoughtful payment plans, you can make sure they’re covered on time. And when you just don’t have enough money, there are steps you can take.  

First, consider which federal student loans repayment plan works best for you

Once you graduate and start earning a salary, it will be time to start paying those loans back.  Choosing the right repayment plan helps ensure you'll be able to make the payment every month. Fortunately, federal student loans offer several repayment plans so that you can find one that works for your budget. Here's an overview:  

Standard repayment plan

This standard plan features fixed monthly payments that pays off your loan completely in 10 years. For consolidation loans, it can take up to 30 years. A 10-year repayment period means you end up making higher monthly payments, so you need to consider whether your budget can afford that.  

Graduated repayment plan

In this plan, monthly loan payments gradually increase over time. So, you’ll start lower at first and then increase that amount every 2 years. Like the standard repayment plan, the monthly payments are calculated so that you’ll pay off your loan in 10 years (or up to 30 years for consolidation loans).   Photo by Cytonn Photography

Extended repayment plan

This plan is designed for borrowers of more than $30,000 in eligible loans. You can choose from fixed or graduated monthly payments with a goal of paying them off in 25 years. This means that you’ll pay more over time than with the 10-year standard plan; however, your monthly payments will be lower.  

Revised pay-as-you-earn repayment plan

Any direct loan borrower is eligible for this plan, which takes 10 percent of your monthly discretionary income as monthly payments. This amount, of course, can change over time as your income changes, with payments recalculated annually. Any unpaid balance for undergraduate study loans beyond 20 years will be forgiven.  

Income-based repayment plan

This plan includes income-based payments that represent 10 to 15 percent of your discretionary income, never to exceed the amount you would pay on a standard plan. In order to be eligible, you must have high debt relative to your income. Payments under this plan are recalculated yearly based on your updated information.  

Income-contingent repayment plan

In this repayment plan, your monthly payment is based on either 20 percent of your discretionary income or the amount you would pay under a 12-year fixed repayment plan. Your monthly payment would be the lesser of the two amounts. Any outstanding loan amount after 25 years is forgiven.  

Income-sensitive repayment plan

This plan is designed for individuals with Federal Family Education loans. Your monthly payment is determined based on your salary, with your loan paid in full within 15 years.   Photo by

Risks of missing student loan payments

If you’re having trouble making payments - whether you miss an occasional student loan payment or you’re consistently skipping them - you’re bound to face serious financial repercussions. The more payments you miss, the bigger the problems. Learn more about what happens when you miss a student loan payment.  

Your student loan immediately becomes delinquent

If you don’t make one loan payment on time, your student loan becomes delinquent on the day after the due date.   Typically, your lender will keep your account in this past due status for 3 months, after which they will contact the three major national credit bureaus. This will lower your credit score, and a lower credit score has several negative consequences that can have a long-term impact on your financial future.    A low credit score can make it difficult, if not impossible, to:
  • Obtain a loan for a major purchase like a car or home.
  • Get a new credit card.
  • Secure approval to rent an apartment.
  • Finance a new cell phone.

You could go into default

If you continue to miss payments, your delinquent loan goes into default.    The timing depends on your student loan. Some federal student loans, for example, go into default after 270 days of non-payment. Others may be considered in default earlier or later than that. Make sure you’re familiar with the terms of your loan so you know what to expect.   Simply put, you cannot let your loan go into default. It brings with it severe ramifications that can turn a minor financial problem into a major one.   Once your loan is in default, the following steps may occur:
  • The bank makes the entire balance of your loan due immediately.
  • Your default status is reported to credit agencies, which will further and substantially impact your credit score.
  • The lender can withhold other money from you, including wages or tax refunds, to recoup those missed payments.
  • Late fees, interest, and collection costs will drive the amount you owe even higher.
  • Your lender can take you to court for the missed payments, which means you’re on the hook for paying court fees in addition to the missed payments, fees, and penalties.
  • You cannot obtain any other federal student loans if your current loan is in default.
  Clearly, you don’t want to reach this dire point. So, you need to develop a method that allows you to make your student loan payments on time every month. Read on for some strategies to do just that.   Photo by LinkedIn Sales Navigator

But first, things to remember if you can’t afford to pay

If you don’t think you can manage your student loan payments, consider negotiating with your lender for a lower monthly rate that fits within your budget. Ideally, you should contact your bank or lending institution before you miss a payment so that you’re in good standing.  

Ask for a reduced monthly payment

Asking for a lower monthly payment that you know you can meet will extend the term of your student loan. That means you’ll ultimately pay more in the long run. However, it can keep you from defaulting. In fact, it’s a win-win situation: You face a more manageable payment plan, and your lender still gets payment in full, even though it will take longer.    Of course, there’s no guarantee that your lender will accept your request, but it’s certainly worth a try.  

Deal only with your lender

Some companies exist to serve as the bridge between you and your lender, helping you devise a repayment plan that suits your budget. Approach these businesses with care.    Some, like Premier Student Loan Center, are no better than scams, with customers complaining that it takes their money but never repays their student loans. The Consumer Financial Protection Bureau commenced legal action last year to halt the operation, alleging that the related companies “deceived thousands of federal-student-loan borrowers and charged over $71 million in unlawful advance fees in connection with the marketing and sale of student-loan debt-relief services to consumers.”   Be extremely cautious if you’re considering letting an intermediary handle your student loan repayment.   Photo by Cytonn Photography

Budgeting with student loans in mind

The best-case scenario is to be able to make that student loan payment every month. When you're successfully able to keep up with those payments, you don’t need to worry about delinquency, default, or a destroyed credit rating.   Follow these strategies to create a budget with your student loan in mind:
  • Incorporate your student loan payment into a monthly budget with other fixed, essential expenses like rent or mortgage, insurance payments, electricity, and water.
  • Adjust your other expenses around these fixed numbers. For instance, lower your monthly entertainment budget to ensure you have enough money set aside to cover your student loan payment.
  • Schedule automatic payments so you never miss a due date. Make sure that payment occurs at a time of the month when you’re paid and able to cover the debit.
  • Consider boosting your monthly income by taking on a part-time job or side gig. While it’s not ideal, it will give you some wiggle room in your budget.
  • If your monthly mortgage payment is taking up too much of your budget, see if you can reduce it by renting out a spare room. If you're renting, you can cut expenses in half by either taking in a roommate or moving to shared accommodations. Again, it may not be your preferred solution, but it's for the short term and certainly better than the alternative.
  Choosing the loan repayment plan that best reflects your financial situation is the most effective way to start paying off your student loans. Follow your budget and prioritize those monthly loan payments, keeping your credit score in mind. If life gets in the way, just remember to be proactive about asking for help from your lender as early as possible. You've got this!