If you’re grꩲaduating, leaving college, or dropping below half-time enrollment, your student debt may soon enter repayment. But thanks to your student loan grace period, you’ll likely ha♊ve six months (or more) before your first payment is due — giving you time to determine how this new expense will fit into your budget.
Here’s everything you ne🥂ed t🎐o know to make the most of this valuable time.
- What’s a grace period?
- How long does it last?
- How to make the most of this time
- Can you extend your grace period?
- Consider consolidation or refinancing
What is a student loan grace period?
Your student loan’s grace period is the length of tꦛime between a triggering event and when you’re required to start making payments on your debt. Triggerin🙈g events commonly include graduating, withdrawing from school, or dropping below half-time enrollment.
Lenders offer this grace period so you c🌠an prepare for repayment by getting a job, figuring out your budget, or enrolling in an appropriate✅ repayment plan.
How long is your grace period?
Grace periods vary in length based on the type of loan and your lender bꦺut typically la🐼st at least half a year.
For example, federal Direct Subsidized and Unsubsidized Loans have a six-month grace period. Federal PLUS loans don’t technically have a grace period, but graduate students are automatically put into a six-month deferment after the triggering event. Parent PLUS borrowers can access t👍🤪he same six-month deferment but must manually request it.
Most private student lenders offer six-month grace periods, too, though there are some outliers. For example, Ascent gives undergraduates up to nine months to start payments, and College Ave provides nine to 36 months of grace to borrowers in graduate, law, dental, and medical de🍸gree programs.
If you’re not sure what can trigg🦹er your grace period or how long it will last, review your loan’s paperwork or contact your loan servicer or lender.
| Important: While most student loans come with grace periods of at least six months, loans made to parents of undergraduates aren’t as consistent — and may not come with a grace period at all. Read the fine print before borrowing a parent student loan and confirm you know exactly when payments begin. |
How to make the most of your loan’s grace period
Your student loan grace period is an opportunity to prepare for repayment. Here’s how to use it to yo🌱ur advantag🀅e.
1. Keep track of your debt
Before y💫ou ♍do anything else, compile information on all your student loans, including the:
- Type of loan (federal or private)
- Lender or loan servicer
- Amount
- Interest rate
- Repayment term
- Grace period length
That way, you’ll have a better unders꧑tanding of your debt and can more accurately plan for the future.
2. Develop a repayment plan
Here are some steps to consider:
- Contact your loan servicers. Confirm your monthly payment amounts and when the first installments are due, then add this information to your loan list.
- Review your monthly budget. Do you have enough wiggle room to accommodate these new expenses?
- Look for recurring expenses you can reduce or eliminate. If you can’t comfortably afford your new payments, see if there are opportunities to lower costs in other parts of your budget.
- Review your repayment options. If your student loan payment is still too high, see what other repayment options you have. For example, federal loan borrowers might enroll in an income-driven repayment (IDR) plan, which sets payments at a percentage of your income.
- Consider setting up autopay. That way, you never miss a payment. Plus, many lenders offer a 0.25 percentage point discount for automatic payments.
“Borrowers need to prepare themselves as best as they can to understand all of their options before starting payments,” said Persis Yu, Deputy Executive Director of the Student Borrower Protection Center. “The student loan sy꧑stem is very complicated, and unfortunately, historically, servicers do not have a good track record of helping borrowers navigate these ꦓoptions.”
Understanding your repayment options and enrolling in the optiಌmal plan could save you thousands of dollars.&n🅰bsp;
“It is important for borrowers to understand the long-term consequences of their choices,” continued Yu. “For example, they may have a lower ⛄payment in the extended or graduated payment plan, but may ultimately pay for longer and pay more.”
3. Research student loan forgiveness options
Depending on the career path you choose, you may be eligible for student loan forgiveness. For example, iඣf you workꦦ for an eligible employer and make 120 qualifying payments under an IDR plan, you may be eligible to have the remainder of your federal loans forgiven under the Public Service Loan Forgiveness (PSLF) program.
Or, if you teach full-time in a low-income school for five years, you may be 🧸eligible for Teacher Loan Forgiveness. Under this program, you could get up to $17,500 of your federal loans forgiven.
While it commonly takes several years to qualify for forgiveness programs, it’s wise to start planning for this early on in repayment. Doing so means you can enroll in the correct repayment program and make sure you don’t waste any tim🐽e making ineligible payments.
Though private student𝔍 loan forgiveness options are fewer, you may qualify for staﷺte or employer-sponsored programs based on your career.
4. Make payments early
For most federal and private student loans, 🅺interest will accrue whi🏅le you’re in school and during your grace period (and other times of nonpayment). If you don’t pay off that interest, it can capitalize and be added to your loan’s principal balance.
Once that happeꦬns, interest will be calculated based on your new, larger balance — and you’ll essentially begin paying interest on your interest. Because of this, paying off accrued interest during the grace period would save money.
☂While this 🔜arrangement is often beneficial, it may not help if you’re hoping for forgiveness.
“Making payments when no interest is due can have the effect of reducing a borrower’s principal balance, which may help the borrower pay less over the life of the loan,” said Yu. “However, if borrowers are hoping to utilize PSLF, for example, unless these payments are qualifying payments and made during qualifying employment, they will not count towards forgiveness and may actually increase the total amount paid on their loans.”
| Note: If you have Direct Subsidized Loans, interest doesn’t accrue while you’re in school or during your grace period. |
Can grace periods be extended?
You can’t extend your federal student loan grace period, but it can be renewed if you go back to school. For example, say you take a semester off during your u💙ndergraduate program. If you return to colꦉlege at least half-time before the grace period ends, you’ll still have a full six months of grace once you graduate.
If your grace period is nearing its end and you don’t think you can afford your payments, be proactive and reach out to your loan servicer. You may be able to defer your student lo꧃ans, allowing you to pause payments for a limited time. However, this is best saved as a short-term solution, since interest will typically continue to accrue.
Another strategy is to enroll in an alternate repayment plan that offers lower monthly payments. Your exact options depend on the type of loan you have and your loan servicer, so contact them well before your first payment is due to see what they can do to help.&nbs🎃p;
Consider consolidation or refinancing
If you’ve got multiple loans, keeping track of them all may feel daunting. Consolidating your federal loans or refinancing your private loans could help you simplify the repayment 🅷process because all of your student debt would be under one new loan.
Check with your private lender before refinancing beca♔use you may lose your remaining grace period and have to start making payments immediately. However, some lenders, like SoFi, will honor y🥃our original grace period when you refinance.
Also, beware of the risks that come with refinancing your debt — especially federal student loans. You’ll lose access to benefits like IDR plans and forgiveness programs when you refinance your federal student debt. This process isn’t reversible, so make sure you understand all the pros and cons of refinancing before making the leap.