Arguably the one thing many college seniors look forward to more than graduating is their student loan grace period. For at least 6 months, you’re not required to think about, look at, or deal with your loans in any way, shape, or form.
While it’s nice to have a temporary reprieve on those repayments, it’s unwise to ignore them just because your grace period permits you to. Unless you already started paying down your debt pre-graduation or you’ve got a solid financial plan in place, avoiding your loans during this time is like taking that big final exam without having studied for it.
Take this time as an opportunity to learn more about what your grace period entails, and what to prepare for when it comes time to repay your student loans. Here are some little-known facts you may not know about your grace period, and some tips on how to turn it into a graceful entry to your student loans.
3 lesser-known student loan grace period facts
When referring to student loans, what is a grace period? For federal loans, the government doesn’t grant borrowers this opportunity for nothing. It’s meant to give you enough time to find a stable job and income, map out a budget, and prepare a loan repayment plan.
Here are 3 key things to know about your grace period, and how to use it to your advantage.
1. There are different grace periods for different loans.
Not every type of student loan carries the same grace period:
- Federal Stafford Loans (both direct subsidized and unsubsidized) have a standard 6-month grace period.
- Perkins Loans carried a 9-month grace period and qualified for an additional 6 months after periods of loan deferment. That was before the Perkins Loan program expired and was closed to new borrowers on Sept. 30, 2017.
- PLUS Loans have no grace period, so repayment begins as soon as you graduate.
- Parent PLUS Loan borrowers can ask for a 6-month grace period, but there’s no guarantee attached to it.
- Private loans normally don’t carry grace periods because they’re not federally backed, though some lenders may carry different policies.
2. Grace periods can start while you’re still in school.
Your enrollment status can determine when your grace period begins or ends. If you’re still attending classes but drop below half-time status, your grace period will begin. If you leave school and your grace period begins, but you return to half-time status, it remains intact, so you won’t owe anything on your loans.
However, if you wait until your initial grace period ends to return to school, that period is gone forever. (Our suggestion: If you volley between part-time and full-time status, strategize your academic schedule. Your grace period may be ticking away and you may be unaware of it.)
3. Grace periods can’t stop some interest from accruing.
You may have a student loan with an iron-clad grace period, but that doesn’t mean it’s strong enough to stop interest from building while you’re not making payments.
Just like during periods of deferment or forbearance, unsubsidized Stafford Loans will still build interest during this time, additional money you’ll owe to your lender when you begin repaying those loans. Stafford loans obtained between July 1, 2012 and July 1, 2014 will also accrue interest during a grace period, as will Graduate/Parent PLUS Loans.
It doesn’t really count as a little-known fact, but we must state it for good measure:
You can still make student loan repayments during your grace period.
If getting ahead of this financial curve is something you can accommodate, go for it. If not, use this as a time to prepare for repayment.
- Get accustomed to your repayment schedule.
Your grace period is likely 6 months, but your loan repayment timeline may be up to 30 years. Is yours a standard, graduated, or extended plan? You’ll want to check during this time, since the shorter the loan, the more you’ll owe monthly.
- How many loans do you have?
Remember the part about different grace periods for different loans? You won’t know how long they are if you don’t know what kind — and how many — student loans you have, private included. Make an itemized list of each one, even if it’s simply one subsidized and one unsubsidized Stafford Loan. You should know the differences in terms, grace periods, and repayment structure.
- Know how much you owe.
Your grace period means nothing if you don’t know how much you’ll need to pay back your lender. Depending on your major, school, and degree, that could mean the difference between a few thousand, to tens of thousands of dollars. Use one of our repayment calculators to get started.
- Customize your payments.
Your grace period is a good time to contact your lenders (whether private or through the U.S. Department of Education) and arrange your payment plan. Set your due dates, confirm your monthly owed amount, and learn about your payment options, such as manual or autopay. (For federal loans, enrolling in automatic payments gives you a 0.25% interest rate reduction.)
- Examine your alternatives.
There’s no way to know after the first 6 months of graduation where you’ll be in one year, much less 10 years. Your financial situation could vastly improve or worsen, and your student loans could potentially be impacted.
As a “just in case” measure, consider this a time to look into consolidating your loans into one loan, grouping them together with one interest rate. Start a budget, fit your loan payments into it, and stick with it, but don’t set it in stone; your budget should evolve with changes to your lifestyle and income.
Don’t let a decades-long financial commitment like a student loan catch you off guard by ignoring the advantages your grace period gives you. Use it as a preparatory time to map out these tips, know what’s in store for you, and stay in control of your repayments — not the other way around.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|