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Your student loan grace period is the period of time after graduation where you don’t have to make payments on your loans — which is up to six months. This gives you time to find a job and get settled before you’re required to make payments.
While the grace period can be a nice benefit, it can cause your loan balance to grow due to interest charges. Here’s what you need to know about how grace periods work and how you can get a head start on your repayment.
In this post:
- How long is your student loan grace period?
- Interest accrues during the grace period (except for federal loans)
- Why you should make payments during your grace period
- Make payments during your grace period
How long is your student loan grace period?
In general, grace periods last for six months after you graduate, leave school, or drop below half-time enrollment. However, not all loans offer them. Whether or not you have a grace period and how long it lasts for is dependent on the type of loans you took out.
Federal student loans
With federal student loans, you can have different grace periods depending on the type of loan you have.
- Direct Subsidized Loans → Six months
- Direct Unsubsidized Loans → Six months
- Subsidized Federal Stafford Loans → Six months
- Unsubsidized Federal Stafford Loans → Six months
- Grad PLUS Loans → No grace period*
- Parent PLUS Loans → No grace period*
*You may be able to defer these loans after graduation
Private student loans
Some private loan lenders do offer grace periods, while others expect payments as soon as the loan is disbursed. If you have private student loans, including any loans you refinanced, contact your loan servicer to find out if you have a grace period and, if so, how long it is.
|Citizens Bank||6 months|
|College Ave||6 months|
|MEFA||6 months for undergraduates|
|Sallie Mae||6 months|
Interest accrues during the grace period (except for federal loans)
For most student loans, including loans that you refinanced, interest will continue to accrue during your grace period. Because you’re not making any payments against the principal or interest that accrues, the balance will continue to grow.
There’s an exception to this rule: If you have subsidized federal loans, such as Direct Subsidized Loans, the U.S. Department of Education pays the interest that accrues on your loan while you’re in school and for the first six months after you graduate. That’s a great perk, as it reduces how much interest you’ll have to pay yourself.
Why you should make payments during your grace period
A grace period can be helpful if you’re still looking for a job. You can focus on the job search without having to worry about making payments on your loans just yet.
But if you managed to land a job right out of school and are already earning income, try to make student loan payments before the grace period expires. This will cut down on the interest that accrues, reduce how much you’ll pay over the length of your loan, and even pay off your loans early.
There are three payment options to choose from:
- Pay full payment amount: With federal loans, you have loan exit counseling which tells you how much your payment will be after the grace period expires. If you have private loans, your loan servicer can tell you how much you’ll pay each month. If possible, start making the full monthly payment as soon as you can after graduating.
- Make interest-only payments: If you can’t afford the full payment amount, consider making a payment that covers just the interest that accrues instead. You can see how much interest accrues each month on your account statement.
- Pay a flat amount: If you have a tight budget but want to pay something during your grace period, think about making a small flat payment each month. Even if you can only afford $20 per month, making a small payment will help cut down on the total interest that accrues.
To find out how making payments now can affect your repayment, use the student loan payoff calculator.
Make payments during your grace period
After graduation, your student loan grace period can give you time to find a job, move into a new apartment, and get settled into post-graduate life. However, if you’re wondering how to pay off student loans fast, you should know that making payments toward your loans while they’re still in the grace period can cut down on the interest that accrues. Over time, you’ll save money and even get out of debt faster.