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When referring to student loans, what is a grace period? Well, a grace period is a time when you don’t have to make payments on your student loans. It typically lasts the whole time you’re enrolled in school and for six months afterward. Let’s take a closer look at the grace period for student loans and how it works.
- When referring to student loans, what is a grace period?
- Should you be paying student loans during the grace period?
- Take these steps before your student loan grace period ends
When referring to student loans, what is a grace period?
A student loan grace period is a period of deferment during which no payments are due on your student loans. Basically, you took out the loans for school, but you don’t have to start paying them until six months after you graduate.
So, exactly how long is the grace period for student loans? The federal student loan grace period is active while you’re enrolled at least half-time in school and for six months after you leave school. Most private lenders offer the same terms, though you’ll have to read over your loan agreement to make sure.
Some private lenders will also let you defer payments if you refinance student loans before going to grad school. Online lender CommonBond, for example, offers academic deferment for borrowers who go back to school.
Note that parent PLUS loans don’t automatically come with a grace period, but you can request to have payments deferred for six months after your child leaves school. And some private student loans might require immediate repayment, particularly those made to parents.
Make sure you understand the terms of your loan so you don’t accidentally miss any bills.
Interest might accrue during the student loan grace period
Even though your payments are postponed during a student loan grace period, interest might accrue on your student loans.
Interest will accrue on federal unsubsidized loans, as well as on private student loans. It will likely then be capitalized, or added on to your principal balance once your grace period ends and repayment starts.
The only exception is subsidized student loans. The government will cover the interest on these need-based loans while you’re in school, so you don’t have to worry about them collecting interest.
But all other loan types will collect interest, so you might be looking at a bigger balance after you graduate than you initially borrowed.
Consolidating student loans can cause it to end early
Typically, you have a six-month grace period on your student loans after you graduate or drop below half-time enrollment. But if you choose to consolidate your loans with a Direct consolidation loan, your grace period could end early.
Consolidating loans can help simplify repayment, as it combines multiple loans into one. It also helps some loans become eligible for income-driven repayment plans (e.g., a parent PLUS loan is only eligible for Income-Contingent Repayment if you consolidate it first).
But consolidating your loans while you’re still in school could cause your grace period to end early, so only apply for it if you’re ready to start making payments on your loans.
Should you be paying student loans during the grace period?
Since interest accrues on most student loan types during a grace period, it’s a great idea to start paying student loans during the grace period, even though you don’t have to.
Even if you just throw $25 per month at your loans, you could significantly cut down on interest costs. As a result, your balance won’t be quite so overwhelming when full repayment begins.
Take these steps before your student loan grace period ends
While the six-month grace period on student loans can be a huge help, it unfortunately has to end sometime. If you’re approaching graduation, take these important steps before your grace period ends.
Log in to your student loan accounts
When student loan repayment is looming on the horizon, it’s important to check in with your student loans. Things can get especially confusing if you hold multiple loans with different servicers.
So take some time to track down your accounts and log in to each of them. Write down your user names and passwords so you can easily access your student loan information and make payments when the grace period comes to an end.
Write down the details of your loans
Once you’ve logged into your accounts, you should see the details of your various loans. To make things easier, centralize this information by writing down the key details of your loans, such as,
- The amount you owe
- Your interest rate
- Your loan term
- Your monthly payment
By writing all this down, you’ll know what to expect once repayment starts and can start preparing.
Find out when repayment starts
Finally, make sure to mark the end of your student loan grace period in your calendar so you know exactly when your first student loan bills are due. The last thing you want is to be caught unawares by a student loan bill.
Hopefully, the grace period has given you enough time to find a job and start making an income. If you can’t afford payments, look into alternative repayment plans, such as income-driven repayment.
And if your finances really can’t handle repayment, find out if you can extend the deferment or put your loans into forbearance. Although both options should be a last resort due to increased income costs, they can be useful strategies for getting through a rough patch.
If, on the flip side, you’re able to accelerate student loan repayment, head to this guide to learn how to pay off student loans ahead of schedule.
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| Variable rates start at... | Fixed rates start at... | Repayment terms | Welcome bonus | Check your rates | |
|---|---|---|---|---|---|
 | 4.54% | 4.49% | 5 - 20 years | $200 | Visit LendKey |
 | 4.99% | 4.47% | 5 - 20 years | $200 | Visit Earnest |
 | 4.22% | 3.97% | 5, 7, 10, 15, and 20 years | $120 | Visit Laurel Road |
 | 4.53% | 4.40% | 5 - 20 years | $100 or $200, depending on the amount you refinance | Visit Credible |
 | 5.09% | 4.74% | 5, 7, 10, 15, and 20 years | $100 | Visit SoFi |
 | 4.53% | 4.83% | 5, 7, 10, 15, and 20 years | $100 | Visit ELFI |