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.
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