If you graduated in May, your student loan grace period is coming to an end. That means you’ll need to start making payments on your student loan debt.
But for many people, job searching can take months, and you may not have a full-time career yet. If you have not found employment and your loan payments are due, learn about what options you have to manage your loans.
What’s a student loan grace period?
For most people who have student loans, there is a “grace period” after graduation. During this time, you do not have to make payments on your loans.
This period is designed to allow you to find a good job and get settled before making payments on your loans.
However, different loans have different grace period terms. Federal Stafford loans have a six-month grace period.while Perkins loans have a nine-month period.
If you had a Perkins Loan, you have a nine-month grace period. The Perkins Loan program came to an end in September, 2017, but the repayment terms and grace periods for those who already have a Perkins Loan remain unchanged.
Some private loans offer grace periods as well. But, the length of time can vary from lender to lender.
During the grace period, some loans will continue to build interest. That’s why it’s a good idea to make payments on the loan during the grace period if you can afford it. They will ultimately cut down the amount of interest you will pay over time.
Job searching for new grads
When you first graduate, having six months before you need to make your student loan payments sounds pretty luxurious.
But in job search time, six months is not very long at all. The employment market is especially tough for fresh grads without experience. And depending on your field, it can take between three and nine months to land your first job after school.
Job searching is hard work, and it can often be a full-time commitment. From scanning job listings to writing customized cover letters, it’s physically and mentally exhausting.
Thousands of new graduates are still unemployed by the time their student loan grace period ends. In fact, 5.6 percent of college graduates from the Class of 2016 do not have jobs, according to the Economic Policy Institute.
Student loan options
If your student loan grace period is over and you are still unemployed, do not panic. There are options that can help you, including deferment and forbearance or working side jobs.
One option for anyone facing unemployment or financial hardship is deferment. This further postpones your student loan payments under certain circumstances.
Deferments are eligible for some federal student loans, including Perkins Loans, Direct Subsidized loans, and Stafford loans. Although interest continues to accrue during the deferment, your lender puts your payments on hold.
Deferments can last for as long as three years but, they’re not automatic. You need to reach out to your lender to request a deferment.
Keep in mind that your lender may ask for documentation showing your lack of income, such as bank statements, as well as proof that you are looking for full-time employment.
Make sure you keep track of what jobs you apply for along with copies of your cover letters as proof you’re searching for employment.
If you do not qualify for a deferment, you may be eligible for forbearance. Under this process, lenders postpone or reduce your payments for up to 12 months.
Just like deferment, your loans will continue to accumulate interest under a forbearance. This approach is an option if you are underemployed. Or, if you are only able to find part-time work and your pay does not cover your expenses, forbearance can help.
There are two types of forbearance: mandatory and discretionary. For a mandatory forbearance, if your payments are more than 20 percent of your income, your lender has to grant you a forbearance.
Discretionary forbearance means your lender can make a decision on whether to postpone your payments after you make a request.
For some borrowers, the idea of postponing payments while interest continues to grow is hard to stomach. Some individuals, therefore, set out to make their monthly payments by combining multiple side gigs to make ends meet.
This approach may not be for everyone. But, it can be a good way to bring in income and pay down your debt while you search for a full-time job.
Side gigs typically have zero or low start-up costs and are scalable. When you need money, you can take on more jobs. When you are in better financial shape, you can ease up your schedule.
Whether it’s shopping for groceries, walking dogs, or freelance writing, doing multiple side gigs can help fill your cash flow gap until you find a full-time job.
While the grace period for student loans gives you some wiggle room to search for a job, many new graduates find that six months is not long enough to find a well-paying position.
What’s more, borrowers often end up owing money on their student loans before they are employed.
If your loan payments are due soon and you are still unemployed, do not wait for a collections notice. Reach out to your lender, explain your situation, and ask for deferment or forbearance options.
This process can take several weeks, so the sooner you apply, the sooner you can find a solution. So make sure you take advantage of the last weeks of your student loan grace period to build a plan to manage your payments.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 Month/Day/Year, 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 08/21/18. 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 ourstudent 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
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.
3 Important Disclosures for SoFi.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|