The grace period of the student loan is the time granted before you must begin paying off your student loans. The amount of time granted varies depending on the loan you are requesting. The intention behind the grace period is to give graduates time to find a job and prepare financially before the first payment is due. Unfortunately, not all student loans have grace periods.
Our guide will answer common questions and explain the crucial details you need to know about the grace period of the student loan.
Are interest accrued during the grace period?
For most student loans, interest will be accumulate even during your grace period. Interest do not accrue during the grace period for Federal Perkins Loans or subsidized Stafford loans made before July 1, 2012 or after July 1, 2014.
If you have unsubsidized loans or a subsidized Stafford loan made between July 1, 2012 and July 1, 2014, interest will accrue during the deferral and grace periods. Unpaid interest is generally capitalized (added to the capital balance) after the grace period.
How long is a grace period for student loans?
Different loans have different grace periods. For private loans, you should review the specific terms of the loan to find out if you have a grace period and how long it is.
- Federal Stafford Loans Receive a grace period of six months.
- Federal Perkins Loans receive a grace period of nine months and are allowed another grace period of six months after an eligible postponement.
- PLUS loans It has no grace period, but may be eligible for postponement.
When does the grace period begin?
For most federal loans, your grace period begins after you leave college. This includes:
- If you leave school
- If it falls below part-time enrollment
Definitions for part-time enrollment vary by school, so check with your financial aid office if you adjust your class schedule.
Can the grace period of the student loan change?
Certain circumstances may change your grace period, such as:
- Active military service: If you are called to active duty for more than 30 days during your grace period, you will receive a grace period of six months when you return from active duty.
- Returning to school: If you re-enroll in school at least part-time during your grace period, you will have six full months to start paying once you graduate or stop enrolling below part-time.
- Consolidation of loans: Once you consolidate your loans, you lose the remaining grace period. You will receive your first invoices approximately two months after the disbursement of the new direct consolidation loan.
What happens when the grace period ends?
Reimbursement begins when your grace period ends. Your loan administrator must provide a loan payment schedule that indicates when your first payment is due. The schedule will detail the amount required in your monthly payments. If you need more time to find a job after your grace period ends, you can request an unemployment delay or an income-based payment plan.
How to take advantage of the grace period?
One of the best ways to prepare during your grace period is to establish yourself financially.
- Find employment That will help you make your monthly student loan payments.
- If interest accrues during your grace period, consider paying interest before the refund begins. When interest is capitalized at the end of the grace period, interest is charged on the highest capital balance.
- Determine your payment plan as soon as possible. Understanding the details of the refund can save you time and money.
- If you already have a job, Start reserving money for an emergency fund. This will be invaluable when unexpected events occur, and it can prevent you from defaulting on your student loan.
How student loan payments affect your credit score
As with any debt, student loans can affect your credit score positively or negatively Paying a student loan can help you establish a credit history, improve the diversity of your accounts and show that you can manage a loan responsibly. However, late payments or default on your loan can damage your credit.
Keep an eye on your credit report to make sure your payments are reported correctly. Only a delay in incorrect payment can significantly damage your credit score. If you are not sure where to start, you can contact the Lexington law firm to get a free consultation on the credit report to get a better idea of your position.