Most people with student loans try their hardest to forget about them while still in school. It can make the entire experience kind of unpleasant when you think about the massive price tag you’re paying.
But as you inch closer to graduation, the thought hits sooner or later: I’ll actually need to pay these off soon. If you don’t have a full time job lined up after getting your degree, that thought can be downright terrifying.
Thankfully for those with federal loans – and some private loans – there exists something called a student loan grace period. This is a system that gives recent graduates a chance to get solid financial footing before making their first payment.
Curious how the grace period factors into your loan situation? Read ahead to find out.
What Is A Grace Period?
Those who took out federal student loans are entitled to a six-month grace period after they are no longer a part-time or full-time student. That time allows them to find a job that will allow them to start repaying their student loans.
During the grace period, interest accrues on unsubsidized loans, but not on Perkins loans and subsidized loans. While you aren’t required to pay your student loans during the grace period, you also don’t have to wait until your grace period ends to start making payments if you can afford to do so.
In fact, the sooner you start repaying your debt, the better off you’ll be.
You can extend your grace period only if the six months haven’t expired and you enroll in classes at the part-time or full-time level. However, if the grace period ends and you become a part-time or full-time student, you won’t have a chance at another grace period when you graduate or stop taking courses.
What Do You Do Now?
When your grace period ends, you have to start making payments on your student loans. Usually you’ll receive some sort of communication from your student loan provider about your minimum payment and due date.
The federal government has a list of providers if you haven’t gotten any information about your loans yet. You can call them to find out exactly when your grace period ends, and how you can start paying your loans. Make sure to give them your correct mailing address, and to sign up for email correspondence so you don’t miss important information about your loans.
This is important – just because you don't hear from your lender doesn't mean you don't have to start making payments after your grace period. Plus, if you've moved a few times in college (which most people have), they might not have your updated information on file.
What If You Can’t Afford to Pay?
Some reports say it can take several months to find a job after graduation – even longer if you took an internship the summer after. There are plenty of students who find themselves unemployed or underemployed when their grace period ends.
If this situation applies to you, apply for deferment or forbearance of your federal loans. These programs allow you to stop making payments on your loans without going into default or ruining your credit. You may have to prove some type of hardship to receive the dispensation, but it’s better than not making payments at all.
If you don't think you're going to be able to afford your loans even with a deferment, consider immediately applying for an income-based repayment plan, such as IBR, PAYE, or RePAYE. These plans will set your monthly payment to a percentage of your discretionary income – typically 10% or 15%. However, if you have very low income, your actual student loan payment could be as low as $0 per month. Learn more about these options here: Secret Student Loan Programs.
What If I Have Private Loans?
All federal student loans come with a grace period, but there are some private loan providers who also have them. Their policies are specific, so don’t assume you have a grace period just because you know someone else who has one with a private lender.
Some banks – such as Discover, Wells Fargo and Citibank – offer six-month grace periods for regular graduates. They also offer nine months to professional students, such as those with law, medical or MBA degrees. Again, call your provider directly to ensure that this policy applies to you. It’s better to verify than to assume and end up skipping payments accidentally.
If you can't afford your private loans, or think you could take advantage of lower interest rates to lower your payments, look at Credible. Credible compares multiple student loan lenders in 2 minutes – so it never hurts to shop around.
The bottom line is that your student loan grace period is designed to give you a little time to get your life organized after college. However, the 6 month period tends to go by quickly. Don't be late with your first student loan payment.