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What is a Student Loan Grace Period?
Kayla Korzekwinski is a Scholarships360 content writer. She earned her BA from the University of North Carolina at Chapel Hill, where she studied Advertising/PR, Rhetorical Communication, and Anthropology. Kayla has worked on communications for non-profits and student organizations. She loves to write and come up with new ways to express ideas.Full Bio
If you recently graduated or left college with loans, you may be asking yourself the following question: What is a student loan grace period? Most students who borrowed loans will receive a grace period on their payments. This is especially true if you have federal student loans. Continue reading to learn about student loan grace periods!
What is a student loan grace period?
A student loan grace period is a timeframe when student loan payments do not need to be made. The grace period starts when a student graduates, leaves school, or drops below half time enrollment. The grace period is a time for the student loan borrower to find employment and establish their finances before having to make monthly payments.
The length and conditions of the grace period depends on the lender and type of loan.
Related: How to defer student loans
Federal student loan grace periods
Federal Direct subsidized and unsubsidized loans have a grace period of 6 months. Unsubsidized loans will accrue interest during the grace period. Subsidized loans will not accrue interest until you begin making payments.
Federal Perkins loans typically have a grace period of 9 months. However, you should contact the school that gave you the Perkins loan to be sure.
Federal parent PLUS loans do not have a grace period. Payment on PLUS loans begins when the loan is disbursed. Though, it is possible to have repayment deferred for up to 6 months. Parents who borrowed a PLUS loan for their student can request that payments not begin until after the student finishes school. A request form must be submitted by the parent to receive this deferment.
Graduate or professional students with PLUS loans will automatically receive a 6-month deferment after they graduate or leave school.
Private student loan grace periods
The grace period for private student loans varies between lenders. Typically, the grace period for private lenders is 6 months. Some lenders have a longer grace period. For example, Earnest has a 9-month grace period. Other lenders don’t have a grace period at all. Be sure you know the grace period of your loans when you borrow them.
Private student loans will accrue interest during the grace period.
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What to do during the grace period
Though there are no payments due during the grace period, you should not ignore your student loans. Use the time to get your finances in order and prepare to start making payments.
First, make a list that includes all the loans you have. Include the principal balance, interest rate, and payment plan for each one. Also, check how long the grace period is for each loan. This will help you keep track of your debt. It will also help you decide which loans to prioritize if you make extra payments.
Next, update your contact information with your servicer. This is how you will receive notice that your first payment is due.
If you have federal loans, use the grace period to decide which repayment plan you’d like to use. Borrowers of federal loans will automatically be enrolled in the standard 10-year plan. There are also 4 income-driven repayment plans, a graduated repayment plan, and an extended repayment plan.
See also: All about income-driven repayment plans
Lastly, consider making payments during the grace period. This will make progress in repaying your debt early on. Payments are especially useful if your loans are subsidized because you’ll be paying toward the principal balance.
Things that could affect the grace period
There are a few circumstances that may affect the grace period for federal student loans.
If you are called for active duty in the military for more than 30 days before the end of your grace period, you will receive the full 6-month grace period when you return.
Return to school
If you re-enroll in school before the end of your grace period, you will receive the full 6-months when you finish school or drop below half time enrollment.
Consolidating your federal loans into a Direct Consolidation loan before the end of the grace period will forfeit the remaining time. However, you can request that the consolidation not be processed until closer to the end of your grace period.
Remember, payments will start again!
The grace period on student loans is a time when you don’t have to make monthly payments. Be sure to use the time to get your finances in order and prepare for payment to start!
Learn more about: Public service loan forgiveness
Summing it up
- Student loans give borrowers a set amount of time after graduation before they must begin payments
- Federal loans typically have a grace period of 6 months
- Interest accrues on all federal loans during their grace periods except for federal direct loans
- Private loans each have their own grace period terms and you should investigate each contract before signing it
- If you are in a position to do it, you can make payments during the grace period to chip down at your principal amount owed
Frequently asked questions
Does interest accrue during student loan grace period?
Interest accrues during the student loan grace period on the majority of student loans. The only exception to this rule is federal direct, or Stafford loans. As a result, if you’re able to afford payments, you might benefit from making payments during your grace period in order to minimize interest. Otherwise, you may begin payments with a hefty amount of interest to pay before you begin paying down your principal.
Can you forgo your student loan grace period?
You cannot forgo your student loan grace period, but you can begin making payments early. So, you can begin paying down your balance whenever you’d like. However, you should note that this means you won’t be able to count those first six months towards Public Service Loan Forgiveness programs. Even if you make regular payments, they will not count towards the 10-year requirement.
What is the difference between a grace period and a post enrollment deferment?
The two are largely the same in terms of their benefits for the student. The main difference between a grace period and a post enrollment deferment is that some loans automatically grant their borrowers a grace period, whereas students must apply specifically for post enrollment deferment.
How long is the student loan grace period?
Most federal loans have a grace period of 6 months, with the exception of the federal Perkins loan, which can have a grace period of up to 9 months. Private loans, on the other hand, all have their own terms for private loans. You’ll have to read your loan terms carefully to learn what your grace period will be.