What is a Student Loan Grace Period & How Should I Make Use of It?
Student loan grace periods are the period of time after you graduate from school (or leave school before graduating) and before you’re forced to start repaying your loans.
Basically, it’s like a time period when your loans are “on hold” or “paused”, and they operate similarly to a Federal Student Loan Forbearance or Deferment.
The grace period was created to allow borrowers to get their finances in order before they’re required to start making monthly loan payments, and has become an especially important of the Federal lending process.
Why is a grace period so helpful? Because after you graduate from school, the grace period will allow you to move wherever it is you plan on living and start working (and thus earning income) so that you’ve got a fighting chance of being able to afford your first monthly student loan payment.
Without grace periods, Student Loan Delinquency and default rates would likely be even worse than they already are (and they’re reaching epidemic levels!), so if you do qualify for a grace period, you should definitely look into taking advantage of it.
Quick Links to Topics Covered Within This Guide
To help you access the information you need most, please feel free to click the links below to be taken to specific sections of content within this Guide.
- What is a Student Loan Grace Period?
- How Do Student Loan Grace Periods Work?
- How Long Do Grace Periods Last?
- Do Loans Accrue Interest During the Grace Period?
- How Can I Find Out What Type of Loan I Have?
- Grace Periods for Stafford & Direct Loans
- Grace Periosd for PLUS Loans
- Grace Periods for Perkins Loans
- Grace Periods for Graduate PLUS Loans
- Grace Periosd for Private Loans
- What Influences the Length of the Grace Period?
- Can I Make Payments During the Grace Period?
- What Should I Do if I Can’t Make a Payment?
- What Happens if I Miss a Payment?
- What Advice Do You Have on Grace Periods?
- What Other Student Loan Topics Should I Research?
But Before We Get Into Details…
Before I explain all the details regarding student loan grace periods, allow me to let you in on a little secret: student loans are complicated, confusing and difficult, by design.
Why? Because student loan lenders and servicing companies make more money when you have trouble paying them back, via fees, fines and interest accumulation.
If you’re having trouble dealing with your student debt, the best way to proceed is to hire an expert to help you figure out your best options and ensure that you’re handling the your loans appropriately.
And there’s only one company I trust to provide assistance to my readers: the Student Loan Relief Helpline – because they’re staffed by actual student debt experts!
If you have questions about your loans, or if you need help figuring out what to do with them, I highly recommend calling the Student Loan Relief Helpline to ask for their assistance.
To reach the Student Loan Relief Helpline, call: 1-888-906-3065.
How Does a Student Loan Grace Period Work?
After you graduate from school, or if your enrollment rate drops to less than half-time status, your student loan grace period will automatically begin.
The grace period provides you with a fixed amount of time before your loan payments need to start being submitted, giving you breathing room so you can start earning money, figuring out your finances, and setting aside the cash required to actually make your monthly student loan payments.
Keep in mind that grace periods are typically only provided for Federal student loans and that the way the grace period works differs for different Types of Federal Student Loans.
If you have private loans, you are highly unlikely to qualify for any sort of grace period at all. For most private student loans, you need to start making payments as soon as you graduate.
How Long Does the Student Loan Grace Period Last?
First, one thing to keep in mind is that you only qualify for a single grace period per loan, but that you will be able to use a grace period for each individual Federal loan you take out.
Furthermore, while 6 months is the standard length of Federal loan grace periods, it is possible to qualify for more than 6 months under certain circumstances, including if you’re called for active military duty or if you return to school during the grace period.
Have you ever wondered why so many people choose to head to graduate school immediately after graduating from their Bachelor’s program?
Getting to delay the date your student loan payments start coming due is a huge incentive to enroll in a graduate degree program, and borrow even more money.
If you want to delay the due date for your monthly payments, then keep reading, because I’ll provide specific details about how to qualify for student loan grace period extensions below.
Do Student Loans Accrue Interest During the Grace Period?
During the student loan grace period, most loans will actually begin accruing interest, even if payments aren’t required, but that depends on the type of loan you have.
To prevent your loan balance from growing rapidly right out the gate, I recommend checking the interest accrual chart below to find out if your particular type of loan is going to start accruing interest during the grace period
If your loan will begin accruing interest, you’re going to want to find a way to make at least interest-only payments even during the grace period, otherwise those interest charges will capitalize and inflate your loan balance, making the total cost of your loan far larger than you had originally planned on.
To find out if your loan will start accruing interest during the grace period, check out my chart below, or contact your loan servicer and simply ask them how the grace period will work for you.
Grace Periods and Interest Accumulation
To find out whether or not interest will accumulate on your loan, check the chart below for your loan type, then see if interest will start accruing or not.
Remember, you should definitely ask your lender or loan servicer to verify the information you find here, because if interest is going to accumulate, you definitely want to start planning for that as soon as possible.
|Type of Loan||Will Interest Accrue?|
|Stafford Loans (subsidized) made before July 1, 2012||No|
|Stafford Loans (subsidized) made from July 1, 2012 to July 1, 2014||Yes|
|Stafford Loans (subsidized) made after July 1, 2014||No, but this could change. Check with your servicer to make sure.|
|Stafford Loans (unsubsidized)||Yes|
|PLUS Loans (graduate and parent)||Yes|
|Private loans||Probably, however they vary. Check with your lender for specifics.|
If your loan is going to accrue interest during the grace period, I highly advise that you find out how to make payments to cover at least your interest accrual, otherwise your loan balance will begin growing rapidly during the grace period.
In fact, almost all of the people who I talk to who are buried in excessive student loan debt, and especially those who owe way more than they thought they would, got themselves into trouble by failing to understand interest accumulation during the grace period.
Please don’t make the same mistake they did because if you allow your interest to accumulate and capitalize, you will end up owing far more money than you planned on having to pay back!
How Can I Find Out What Type of Student Loan I Have?
It may seem crazy (if you’re the organized type), but tons of people don’t even know if they have Federal loans or Private loans, and even amongst those with Federal loans, an even greater percentage of those borrowers don’t know what type of Federal loan they have.
These are really important details to planning how you’re going to tackle your student loan debt, so if you aren’t sure what type of loan you have, then now is the time to sort that out, since it’ll play a huge role in determining your eligibility for benefits, like Forgiveness Programs, Borrower’s Defense Discharges, Closed School Discharges, Repayment Plans, etc.
The fastest way to figure out what type of loan you have is to contact your loan servicer, which is the people you get letters and/or emails from, and the people who you will eventually be making monthly student loan payments to.
What If I Don’t Know Who My Loan Servicer Is?
If you know you have a Federal loan, or loans, but you just aren’t sure what type you’ve got, then an easier path to finding out what type of loan you have is to visit the National Student Loan Data System.
You can rest assured that this website is safe, as it’s the official U.S. Government system for student loans, so you can trust the information you receive there.
Finally, if you don’t know if your loans are Federal or Private, and you don’t know how to contact your loan servicer, then the last place you can look is your Credit Report, which will list any private loans you might have.
Once you’ve determined the type of student loan you have, please make sure to write that information down and store it somewhere you can refer to it later, because it’s going to play a huge role in determining what sorts of benefits you’ll have access to once your repayment period begins.
And for the record, Federal student loans are significantly more flexible than Private loans, so if you don’t have any loans yet, I would highly advise you try to limit your borrowing to Federal debt, because it’s way easier to get rid of than Private debt.
Grace Periods for Different Types of Student Loans
Below, I’ll detail some specifics of the way that grace periods work for specific types of loans, including the many different types of Federal student loans, as well as Private loans.
Remember, the most important part of understanding how your student loan grace period will work is first determining what type of loan you have.
If you aren’t sure what type of loan you’ve got, then you need to read the section above called “How to Find Out What Type of Loan You Have”. Scroll back up and read that section before proceeding!
The Grace Period for Federal Stafford & Direct Loans
Stafford Loans, both subsidized and unsubsidized, and Direct Loans, both subsidized and unsubsidized, all come with an automatic 6 month grace period.
The grace period for older Stafford Loans may be slightly longer.
Remember, the best way to find out how long your grace period lasts (and only way to verify that the information you’re reading is accurate) is to contact your loan servicer.
The Grace Period for Federal PLUS Loans
PLUS Loans do not have a grace period and require you to start repaying the loan when the final loan disbursement is paid out, usually within 60 days of the time the full loan balance has been issued.
However, if your PLUS Loan was disbursed after July 1, 2008, then while you won’t get a grace period, you can apply for a Federal Student Loan Deferment, which operates nearly identically to the grace period.
Parents who took out a PLUS Loan for a child can get a deferment while the child is still in school or for 6 months after the child leaves school, either via graduation, or withdrawing.
Parents who are in school themselves can also qualify for a deferment, regardless of the enrollment status of their children.
The Grace Period for Perkins Loans
For federal Perkins Loans the usual grace period is 9 months.
However, if you’re enrolled less than half-time then your school’s financial aid office will have information on what your grace period will be.
One other thing to keep in mind about Perkins loans is that they also do not accrue interest during the grace period.
If you can limit your borrowing to Perkins loans, I would highly advise that you do!
The Grace Period for Graduate PLUS Loans
Graduate PLUS loans don’t qualify for a standard grace period at all, but their payments can be deferred as long as you’re enrolled in school at least half time.
If you choose to use one of these deferrals, it will operate really similarly to the standard grace period, lasting for six months.
Once the deferment period ends, your first monthly payment will become due 45 days later, so you’ll still get some additional breathing room in addition to the 6 months.
The Grace Period for Private Student Loans
As I’ve mentioned several times above, Private loans don’t usually come with grace periods at all.
However, some private loans do provide grace periods, and the best way to find out if your private loan does is to contact your lender or loan servicer, because the specifics of the private grae period can vary wildly.
What Impacts the Length of Grace Periods?
It’s important to keep in mind that grace periods can change for a variety of reasons including:
Consolidating Your Loan
If you Consolidate a Federal Student Loan during the middle of a grace period, then the grace period will automatically end and you will need to start making payments right away.
Getting Called to Active Military Duty
If you have more than 30 days grace period left and you get called for active duty, your grace period will continue through your duty call-up, and you’ll get an automatic 6 month extension added onto the end of your grace period at the end of your deployment.
For example, if you were 4 months into your grace period when you were called for active duty, your grace period would automatically extend through the active duty call-up time, and you would get another 6 month grace period that begins when your active duty deployment ends.
Grace periods for active duty service personnel can be extended in this way for up to three years.
Returning to School
If you go back to school at least part-time during your loan’s grace period then your loans automatically get put back into a deferment or grace period like status and you won’t have to make payments against them.
Furthermore, even if you drop to less than part-time student status, or if you stop attending again outright, you will still qualify for a new 6 month grace period on the original loan.
This is a tactic many people have used to effectively delay the initiation of the repayment process, extending the time they’re allotted before they need to start making monthly payments.
Can I Make Payments During the Grace Period?
Yes, you can, and it’s a great idea to do just that, especially if your loans are of the types that accrue interest during the grace period.
For loans that accrue interest, making payments during the grace period is the only way to avoid interest capitalization, which is the process that inflates the cost of your loans due to interest racking up.
In fact, as I’ve mentioned several times above in this post, if you have a loan that will accrue interest during the grace period, I would highly advise that you make payments that will cover at least that interest accumulation, because otherwise, your loan will get much more expensive than you had originally planned on it being.
Most people I speak to who are completely buried in student loan debt ran into trouble because of issues like this – interest accumulation which occurred during a deferment or a grace period, which they weren’t aware of, and which skyrocketed both the overall balance of their loan, as well as the monthly payments.
Don’t fall into that trap! Make sure that you understand if your loans will accrue interest during the grace period, and if they will, come up with a plan to cover that interest accumulation by making minimal monthly payments even while the loans are on pause.
If I Want to Make Payments During the Grace Period, Where do I Send Them?
If you do choose to make payments during your grace period, you’ll send to the same place that you’d end up sending them once your loans go into normal repayment.
Below is a chart that explains how to find out where you should be sending your payments, but remember, contacting your lender or loan servicer is always the best way to find out what you’re supposed to be doing, so don’t be shy about reaching out to them!
|Loan Type||Who You Pay|
|Federal Perkins Loans||Contact your school to find out.|
|Direct Loans and FFEL Loans that are owned by the Department of Education||You pay your loan servicer. Contact them for information.|
|FFEL Loans that are not owned by the Department of Education||You pay your lender, the organization that gave you the loan.|
Note that the information above also applies to where you’ll send payments once your grace period ends and your loan enter the normal repayment process.
While your loans are on pause during the grace period, you’re going to be working with the same organization both before and after, so you might as well familiarize yourself with who they are and how they operate now.
If I Want to Make Payments During the Grace Period, How Can I Send Them?
There’s two ways to issue payments for your student loans, electronically (via direct deposits or some other fashion) or via snail mail (by sending checks).
Typically, it’s your choice how you want to issue payments, but to be sure that you’re in the clear, make sure to contact your lender or loan servicer and ask them about your plans.
Again, you’ll be working with this same lender or loan servicer throughout the repayment process, meaning for the next several years (or even several decades depending on how quickly you pay off the loan), so there’s no reason to be shy about contacting them.
Keep in mind that your lender and loan servicer are legally obligated to tell you the truth, fully inform you about your options, and even provide you with sound advice about which options will work best for you, so you shouldn’t be afraid to speak to them.
Making Payments Electronically
The easiest way to receive statements and issue payments is electronically.
Your lender or servicer will also offer you the option of having your payment automatically deducted, which is a great idea because it prevents you from forgetting to make it, and sometimes even offers a discount.
Many lenders have begun providing a discount to borrowers who agree to enrolling in autoplay plans, and the Federal Government offers their own 0.25% discount on the interest accumulation for any borrowers that sign up for automatic payment deduction.
And while that 0.25% may not seem like much of a discount, over the lifespan of a $20,000, $50,000 or $100,000+ student loan, it can amount to some serious savings.
If you’re offered the option of enrolling in electronic or automatic monthly payments, I would highly advise that you take that opportunity into serious consideration.
Making Payments Via Snail Mail
You’re certainly free to issue payments the old school way via snail mail, but again, this risks forgetting to issue them on time, having them get lost in the mail, etc., so this is not the best way to handle your loans.
However, if you do want to make payments this way, contact your servicer to find out what they need from you, because you’ll probably have to send in some kind of deposit slip or receipt like paperwork along with your checks.
Once you’ve ironed out the process they want you to follow, make sure to follow their instructions, to the letter, and don’t forget to issue any checks or you’ll risk going into Delinquency, which can lead to a Default.
Can I Pay More Than the Required Amount?
Yes, you absolutely can, and for anyone who wants to reduce the total costs of their loans by paying them off early, this is the best way to accomplish that goal.
However, if you do choose to make larger payments than are required, please remember to make sure your loan servicer knows that you don’t want this extra amount applied toward the next payment, because they’ll usually default to applying any overage to the next one instead of using it to cut down your principal balance.
What this does is effectively negates any benefit of issuing a payment over the required minimum, meaning that your loan won’t end up getting paid off early, and you won’t end up saving yourself from any interest charges.
As usual, the best way to ensure that your extra payments are counted properly is to contact your loan servicer and ask them what you need to do to make sure that they properly account for the extra funds you’re sending in.
What Should I Do If I Can’t Make a Payment?
As soon as you have even an inkling of an idea that you won’t be able to make a full payment, or that you’ll miss a payment entirely, you need to contact your loan servicer and talk to them about changing your repayment plan, or exploring options for using a Federal Student Loan Deferments or Consolidation to prevent you from going into Delinquency.
Why is this so important? Because once you enter Delinquency the rules around your loan and your repayment process all change, and not to your advantage.
If your Delinquency lasts for too long, you’ll risk defaulting on your loan, which is something you want to avoid at all costs, because then your only real recourse will be to attempt a Federal Student Loan Rehabilitation.
If I can stress just one thing that you need to do to avoid facing a student loan crisis, I would advise that you do everything you can to avoid entering Delinquency or Default at any time.
As I noted above, you do need to keep in mind that if you consolidate a Federal loan, your grace period will end immediately, so make sure to take that into account when thinking about your options here.
And remember too that even after your grace period ends, Deferment, Forbearance, and Consolidations are all still available to you if you’re having trouble making payments.
What Happens if I Miss a Payment?
If you don’t make your payments, your loan will be moved to delinquent status and your loan servicer will start sending you a lot of friendly reminders to pay up or start facing consequences.
If you don’t make any payments for 270 days after your delinquency begins, then your student loan will default and now the real financial and legal pain will begin.
Both student loan delinquency and student loan default will negatively affect your credit rating, making it harder for you to borrow more money, qualify for a job that runs credit checks, rent an apartment, etc., so you definitely don’t want this to happen.
Additionally, if your loan does default, you’ll open yourself up to the possibility of a Student Loan Wage Garnishment, or a seizure of any tax refunds that you were supposed to receive, or having liens put against your property or your assets, so you definitely don’t want to go this route.
Again, if you think you’re going to miss a payment, the best thing you can do is contact your servicer immediately to come up with a plan for avoiding going into delinquency and default.
Any Other Advice on Student Loan Grace Periods?
Yes, the grace period is a great time for you to get to know your loans and your options for dealing with your loans.
During your grace period, I highly advise that you make a detailed list of all your loans, including the names and contact information of your loan servicers, loan amounts, monthly due dates etc.
If you’re not on top of things it’s easy to accidentally miss a payment, enter delinquency or even default, and end up being reported to a credit agency and having collection actions initiated against you.
Trust me when I say that you do not want that to happen, so make sure that you remain as organized as possible in order to avoid it.
During your grace period, you also need to be working as hard as possible to find a job that pays you well enough to afford your monthly student loan payments, so use this time to update your resume and hit the bricks, because when the grace period ends you’re going to need to start paying back those loans and you will want to be gainfully employed before that happens.
Another thing you can do that will really help is to practice living on a budget that doesn’t include whatever your eventual loan payment will be so that you can get used to spending only as much as you’ll be taking in minus the cost of your eventual student loan payment.
Smart borrowers will start putting that money aside into an emergency fund to experience what it’s like to make their monthly payments, even before they’re due, just so they can get used to the experience of ‘paying’ their student loans.
Anyone who does this will find it easier to make that transition when it comes time to actually pay the money to their loan servicer, and if you practice this kind of financial responsibility early on, you’ll have a much better chance at remaining solvent down the line.
What Other Student Loan Topics Should I Research?
I build this site to help people fully understand how to deal with their student loans, and I’ve got pages on just about any student loan-related topic that you can imagine.
To get details about dealing with Federal student loans, check out the pages of my site on Getting Help with Federal Student Loans, Federal Loan Student Forgiveness Programs, the Borrower’s Defense Against Repayment Program, the Closed School Loan Discharge Program, Federal Student Loan Bankruptcy Discharges, Federal Student Loan Consolidation Programs, Getting Help with Federal Student Loan Delinquencies, Federal Student Loan Default Rehabilitation and Stopping Student Loan Wage Garnishments.
For information on dealing with Private student loans, be sure to visit my pages on Getting Help with Private Student Loans, Private Student Loan Forgiveness Programs, Private Student Loan Consolidation, Private Student Loan Bankruptcy Discharges and Getting Help with Private Student Loan Defaults.
Have Other Questions?
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Disclaimer:Information obtained from Forget Student Loan Debt is for educational purposes only. You should consult a licensed financial professional before making any financial decisions. This site receives some compensation through affiliate relationships. This site is not endorsed or affiliated with the U.S. Department of Education.