When you graduate from college or fall below halftime, most student lenders offer a grace period. A student loan grace period is a break between when you graduate and when you need to start repaying your student loans. A grace period allows you to start building an income in order to start repaying your student loan in full, although you can choose to start repaying your loans sooner.
What is a student loan grace period?
A grace period for student loans is the period after you graduate or after the half-time enrollment period ends and before you have to start repaying your student loan. For most student loans, the grace periods last six months, although you won’t be punished if you start paying them off sooner. The purpose of a grace period is to give you time to find a job after college before you have to start paying off your student loans.
How long is the grace period for federal student loans?
Most federal student loans offer a six-month grace period:
- Subsidized and non-subsidized direct borrowers benefit from a six-month grace period.
- PLUS loans used for graduate or professional students will be automatically enrolled with a six-month deferral.
- Parent PLUS loan borrowers can apply to be enrolled in a six-month deferral after their child graduates or falls below half-time.
With the exception of direct subsidized loans, federal student loans will accrue interest during your grace period or deferral after graduation.
How long is the grace period for private student loans?
Many private student lenders try to give borrowers the same grace period as federal borrowers. Examples include:
If you’re not sure if you have a grace period, check your loan agreement or contact your lender.
Can you extend the grace period on student loans?
In almost all cases, you cannot extend the grace period on your student loan. The only time a grace period can be extended on federal student loans is if:
- You return to at least one half-time registration before the end of your grace period.
- You are called up for active military service before the end of your grace period.
If your grace period has already passed but you need more time to get your affairs in order, you can ask to put your loans on probation or forbearance. Both of these temporarily suspend your federal student loans for a number of months. Interest will continue to accrue, but you won’t be penalized if you don’t make payments.
If a private student lender offers a grace period, you will need to check with your individual lender to see if they offer deferment options. Some lenders offer this on a case-by-case basis.
Benefits of a Student Loan Grace Period
A grace period is an extra buffer before you have to start making payments on your student loans. Many graduates appreciate the time after graduation to get a job that allows them to make the payments. After you get a job, a grace period allows you to assess your monthly income, work out your budget, and determine if you need to apply for a different repayment plan after the grace period ends.
A grace period particularly benefits borrowers who have direct subsidized loans. These loans do not earn interest until the grace period ends, so there is little downside to taking advantage of the grace period.
Do you have to make payments during the grace period?
While the grace period is nice, the main downside of one is that most loans will accrue interest during this period. So when you begin to repay, all of that accrued interest will be added to your loan principal balance.
The good news is that you can choose to make payments during your grace period if your finances allow it. You may want to make payments during the grace period if:
- You get a job right out of college that gives you enough income to make payments.
- You have unsubsidized, parent PLUS, or private student loans that earn interest while you are in school as well as during the grace period.
- You’re up to date on your other bills and have enough money to start making payments sooner.
- You want to reduce the total interest due by making interest-only payments.