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Paying $0 Per Month On Your Student Loans

A zero-dollar monthly payment may seem like a scam or too good to be true, but it is a reality for some federal student loan borrowers.

Written By: Michael P. Lux, Esq.

Last Updated:

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Paying $0 Per Month On Your Student Loans

A zero-dollar monthly payment may seem like a scam or too good to be true, but it is a reality for some federal student loan borrowers.

Written By: Michael P. Lux, Esq.

Last Updated:

Affiliate Disclosure and Integrity Pledge

The idea of getting a bill for zero dollars from your student loan servicer may seem like a scam or too good to be true. Fortunately, due to income-driven repayment plans, a $0 bill is a real thing. These income-driven plans, or IDR plans, charge borrowers based upon what they can afford to pay instead of calculating payments based on how much they owe.

While there are some downsides to a zero-dollar payment, it is still a great option for many.

How do I get a $0 payment?

The biggest limitation with a zero-dollar payment is that it is only available on federal student loans. If you have private loans, it isn’t an option.

The next big limitation is that not everyone will qualify for a $0 payment. To get payments based upon how much you can afford, borrowers need to sign up for an income-driven repayment plan. The income-driven repayment plans, such as IBR, PAYE, and REPAYE, require payments of 10 to 15% of a borrower’s discretionary income. If the government formula determines that you do not have any discretionary income, your payment will be $0 per month.

Payments on income-driven repayment plans are calculated yearly. As income goes up or down, monthly payments will adjust accordingly.

Is a $0 Payment the same as a Forbearance or Deferment?

No. Forbearances or deferments do not usually last a year. There are also limits on deferments and forbearances, but there are no time limits for borrowers making zero-dollar payments on an income-driven repayment plan. Year after year a borrower may qualify for $0 payments.

Perhaps more importantly, $0 payments can count towards student loan forgiveness. All borrowers on income-driven repayment plans can have their loans forgiven after 20-25 years, depending upon the repayment plan selected. Best of all, eligible borrowers who are working in public service can have their zero dollar payments count towards the 120 required payments for public service loan forgiveness.

What is the downside of a zero-dollar payment?

It isn’t all good news for borrowers who qualify for a $0 payment. Even though they won’t be expected to pay anything each month, the student loan interest does not disappear. That means the loan balance will actually increase with each passing month.

Borrowers in this situation should all understand capitalized interest. This is when the extra interest gets added to a borrower’s account. When this happens, the borrower starts paying interest on the extra interest. This can drive the balance up very quickly. Thus, borrowers will want to be careful to avoid unnecessary capitalization of their interest… so don’t miss any income certification deadlines!

Do I need to mail a zero-dollar check or have my lender withdraw $0 from my bank account?

While borrowers have $0 payments, there is no need to send in a check or complete any additional paperwork each month. For the student loans without a required payment, borrowers just need to remember to certify their income before the lender imposed deadline.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

63 thoughts on “Paying $0 Per Month On Your Student Loans”

  1. Hi!

    I am a new graduate Physician Assistant. I have secured a job with a qualified employer. I am still in the credentialling process. All of my loans are direct federal loans (some direct unsubsidized and direct grad plus) I was wondering a few things.

    Should I consolidate my loans and defer the waiting period so I can start PSLF payments earlier?

    How do they calculate “0” dollar loan payments? Is it based on what you made last year? Or what my current salary will be?

    Thank you!

    • Great questions Jennifer.

      Consolidating to get an early start on time towards PSLF can be a very smart strategy.

      As for calculating monthly payments, the standard method is your most recent tax return. If your income has dropped since your last tax return, you are able to document income using recent paychecks.

  2. Hi! I just had a quick question, I want to make sure that I am understanding this correctly. I am currently on a $0 payment plan and have been for about 2 years… as you can imagine my interest has made the amount I owe dramatically increase.
    If I start to make payments on the $10,000 interest I owe, this will not change my IBR plan? I went to a loan workshop when I graduated grad school and I may have misunderstood the speaker. She had stated to not make additional payments as this could change the payment plan you are on.

  3. I currently have a $0 payment on my IDR… Assuming I recertify on time, what happens to any of the unpaid interest? Will the interest capitalize? Will the interest be forgiven at the end of the cycle? Will it carry over to the following cycle/year? Will the accrual of interest start over in the following cycle? Etc…

      • So if I pay $0 during the entire cycle, then recertify on time the interest still gets tacked onto the principle?
        If I pay a large sum on the loan at the beginning of a new cycle will it go to interest from the previous cycle first before going toward principle? Sorry for all the questions. Just trying to figure out the best way to attack this debt.

      • As long as you recertify on time each year, it won’t capitalize.

        When you make payments, the payment is first applied to fees, then the outstanding interest, then the remainder (if any) is applied to the principal balance.

        If you are paying $0 per month for an extended period, it likely means that you are working towards loan forgiveness. If that is the case, I don’t really see an advantage to paying down the accrued interest. However, you certainly have the option of paying down the interest whenever you want.

  4. Hi! I am a certified teacher, my license is currently expired but eligible for renewal. I currently work at an elementary school as an Exceptional Education Instructional Assistant. My payments in my IBR have just dropped to $0, prior to that they were $205. I’ve been paying on, occasionally been in deferment/forbearance some years, since 1995. Is there a way to get the remainder of my loan forgiven since I have been paying for that long? If not, if I continue to make my previous payment does that payment get applied to the principal first? I have been employed at a qualifying school for the last 5 years but I don’t think I meet the requirements for teacher forgiveness since I am not a classroom teacher and my license is expired. What’s my best course of action? Thanks!

  5. apparently i’m eligible for $0 payments, what’s the fastest way i could pay off my loan? It’s a small amount & i’m just wondering if i can make multiple ‘payments’ back to back and be done with it

      • So when I fiddle with the loan simulator on studentaid.gov, itll give me a projected date of May 2040 for the IDR plans, but with a $0 payment its always gna be the same amount, so is my debt contingent on a certain timeframe or a certain number of payments?

        (My loan is in default but it’s also so old, it’s dropped off my credit report already, & there’s no other specific benefit to doing the 9 payment loan rehab vs IDR as far as I can tell)

      • Great point. We often talk about forgiveness coming after a certain number of years, but it is actually a certain number of payments before forgiveness is earned.

        However, if you are on a $0 payment plan, those $0 payments each month will count.

        The important takeaway is to be sure to certify your income on time each year. If you miss a deadline, you may miss out on a month or two worth of $0 payments, which could extend repayment further.

  6. My tax refund was taking all of it wondering wat can I do to prevent this from happening again I tried to apply for hardship but the WOULDNT give me ya being that I’m guessing since the loans are over 10 years old went to collections it’s says my taxes was for non irs debt plz help this has made things very bad for me and my family

  7. Hey there,

    Excellent post! I just wanted to post here my current situation so that I can further understand how the future may look for repaying my student loans.

    I am a recent graduate with a $31,000 balance in federal loans. I recently submitted my Employment Certification form for PSLF, IDR plan form (under PAYE), and two proofs of income being my recent W2 from the job I started in September as well as my latest pay stub. I received a message from my loan servicer saying that I am required to pay $0 for the year until my next due date in April 2021.

    I assume that interest will continue to accrue for the year since I am not required to make a payment, but should I submit payments to, at least, cover the interest that has accrued while I was in school? Is it even worth doing so? I already have my date to re-certify my information for next year but if I re-certify and continue to stay enrolled in PAYE, assuming that next year I will have a dollar amount to pay since I will make a year with my current job, am I paying off the extra interest on the interest as you mentioned in the article?

    Generally, I would just like to have some guidance on how I should handle my first year in repayment and going forward. Thanks!


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