You might have heard of a student loan grace period, and you might be wondering what it is and how it will affect you if you have student loan debt or want to refinance your student loans.
This article will explain exactly what a grace period is, how to find out if you have one, and if you do, and how it affects your student loan repayment options.
What Is a Student Loan Grace Period?
A student loan grace period is a period of time after you graduate, leave school, or drop below half-time where you are not required to pay your student loans. Not all student loans have grace periods, even if they are Federal loans. The student loans that have grace periods are Direct Subsidized loans, Direct Unsubsidized loans, Subsidized Federal Stafford loans, and Unsubsidized Federal Stafford loans, and the grace period for those types of loans is six months before the payment is due. Federal PLUS loans do not have a grace period, and sometimes private loans will and sometimes they will not. You'll have to talk to your lender or read the fine print before borrowing to find out what type of grace period, if any, your loan includes.
The idea behind a student loan grace period is to give you time after you graduate from college to find a job and get settled. However, if you leave college without graduating or drop below half time, you will still have a grace period if your loans qualify.
How Do I Figure Out If I Have a Grace Period?
In order to figure out if you will have a grace period, it's important to know the types of loans you have. The first step is to go to the National Student Loan Data System and create an account. Once you have an account, you will see all of the Federal loans you've taken out, and when you click on each one of them, you can see detailed information about each one of your student loans, including the type of loan it is and your interest rates. If it's one of the types of loans that has a grace period (like the ones mentioned above), then you know you will have six months before you have to make a payment.
If you have private loans and you aren't sure if you have a grace period or not, you will have to contact your lender to find out if you qualify. You should also get a letter from all your student loan servicers once you leave school telling you exactly how much you owe and when your first payment is due.
Keep in mind that if you have the money to pay your student loans and there is no pre-payment penalty, you should get started paying them as soon as possible. The reason is that many student loans still accrue interest while they are in a grace period, so the sooner you start paying them, the better. Additionally, if you decide to refinance your Federal student loans with a private student loan company to save on interest costs, don't forget to ask about grace periods and if they still apply after the refinance.
What Happens When It's Over?
Once your grace period is over, it's time to start paying your student loan bills. If you still haven't secured a job by the time your student loans are due, it's extremely important that you call your student loan servicer to work out an alternate payment plan. The last thing you want to do is ignore your student loan bills if you can't pay them. There are so many resources available to people who are struggling with their finances – from loan deferment to loan forbearance to income based repayment to loan consolidation. Again, if you are having trouble paying your student loans, call your student loan servicer (the company who issued you the loan) and try to work out alternate repayment options.
What Happens If I Go Back to School?
Most people only get one grace period, so if you decide to return to school for graduate school after a few years in the workforce, your student loans might be due right when you are finished, although you need to check with your specific student loan servicer and school to find out what will happen in your specific situation. However, if you return to school at least half-time while you're still in your original grace period, the clock resets and you can still get the grace period when you leave school again.
Ultimately, the grace period is designed to help students adjust and acclimate to the real world after graduation. It's important to be aware of it and to do your research about the amount of time your grace period lasts and whether or not your student loans accrue interest during the grace period. This will help you make the best decisions about your loan repayment plan and hopefully allow you to successfully manage your student loans in the future.