When Referring to Student Loans, What is a Grace Period?

When Referring to Student Loans, What is a Grace Period?

When Referring to Student Loans: A grace period is a limited period of time right after graduation, during which no payments are due to student loans. The clue behind a grace period is that people are given sufficient time to find a job, transition out of college housing, and also get situated before their first payment becomes due.

The grace period for most student loans lasts for six months, although some loans, such as federal Perkins loans, have longer grace periods. In this article, my main focus is on the meaning of the grace period when referring to a student loan.

Grace periods are critical during transitional periods so that you don’t really have to worry about paying your student loans especially if you are still looking for a job, trying to find housing and also getting your life in order after completing your degree program.

Then again, interest still accrues on your , and you will eventually get billed. If you are not ready for that, it can be problematic.

Many people don’t understand that grace period can only be used once. That means that once you use up the grace period on a particular student loan, it cannot be used a second time.

This gets some graduate into trouble, because they may not realize that while their graduate school loans have a grace period, their undergraduate loans do not.

How to Prepare for the End of Your Grace Period

If you have recently graduated from a degree program and aren’t sure how your grace periods line up, it’s necessary to get that information so that you can be prepared for repayment.

First, reach out to your loan servicers. Find out when your grace periods end, and when your first due date is once you enter repayment.

That way, you are ready and prepared when that first billing statement arrives at your doorstep. Then, use that last month or two of your grace period to figure out what repayment plan option is going to be the best for you.

There is a menu of many different types of repayment plan options. You might be able to extend the repayment term and lower the payments if you’re still having trouble securing employment.

You could also explore an income-driven repayment plan, where you can make payments based on your income for a period of time.

If your income is low enough, you might start off with a very low payment or even no payment at all. You can also explore options like deferment and forbearance to further postpone payments if you’re experiencing an ongoing hardship, but generally, income-driven repayment is a better option in those situations.

Borrowers can also use this time to think about loan consolidation. The federal government offers a student loan consolidation program, which in some cases can be beneficial.

It can open up new repayment plan options or simplify repayment if you have multiple federal loans with multiple loan servicers.

But there are also sometimes downsides to consolidating, including erasing any prior repayment progress you may have made on the underlying loans.

Use your grace period strategically to figure out your best repayment approach for your student loans. Before you do anything, and before you get that first bill, do an inventory and figure out what student loans you have, and what your repayment options are.

It’s necessary to develop a game plan so that you’re not scrambling when your grace period ends.

What Should I do During My Grace Period?

It’s tempting to sit back and not worry about your student loan repayments. And that might be exactly what you need while you try to cobble together your new adult life after leaving school.

Still, there are a few things you can do during this time to save on interest later on down the road.

Don’t Take the Grace Period If You Don’t Need It

The grace period is designed to give people time to steady their financing before they start having to make payments on their student loans.

If you have a stable income right out of college, it’s in your best interest to start paying down the loan as quickly as you can, especially if your grace period accrues interest.

Student loans can and do follow people for their whole lives, and the ones that find success with their student loans are the ones who are aggressive about paying them off as fast as possible.

We suggest that you not only avoid taking the grace period if you do not need it but paying even more towards the loan to pay down the balance as fast as possible.

Student loans have a pretty high-interest rate in today’s market, and they are not something you want to carry around with you for too long, if not necessary.

Frequently Asked Questions – FAQs

1. What’s the grace period on Citizens Bank s?

While Citizens Bank allows you to choose how you repay your loan while you are still enrolled, there’s no grace period after you leave school.

2. Can I pay off my student loans before my grace period ends?

Generally, yes. There are no prepayment penalties on federal loans or with most private student loans, so you can pay off your loans whenever you want.

3. How can I find out what my student loan grace period is?

If you have a Federal Direct or Stafford Loan, your grace period is six months. Perkins Loans come with nine-month grace periods. PLUS have none. If you’re still not sure, Contact your loan servicer to find out when your first loan repayment is due.

StudentsandScholarship Team