Earning a degree is a major accomplishment. But if you took out student loans to cover college costs, the payments can be a financial burden once you leave school. Fortunately, many student loans come with a grace period, meaning you may not have to worry about making payments immediately after graduation.
Although it might be tempting to put off thinking about your debt until several months down the road, you can set yourself up for success by taking advantage of that student loan grace period. Learn how student loan grace periods work and what you can do during that time to best manage your debt.
What Is a Grace Period for Student Loans?
A student loan grace period is the time between when you leave school and when your payments begin. “It’s designed to give you time to find a job and get your finances in order before you have to worry about your payments,” says Kat Tretina, an Orlando-based personal finance writer and certified student loan counselor.
The grace period for federal student loans kicks in when you graduate, leave school or drop below half-time enrollment. The federal government pays the interest on subsidized loans through the grace period. Not so with unsubsidized loans – and any accrued interest will be added to the loan balance if unpaid.
If you have federal loans and you re-enroll on at least a half-time basis before the grace period expires, it resets, according to Mark Kantrowitz, a student loan expert and author. “This is why the summer break does not use up part of the grace period,” he says. On the other hand, if you were to take a full semester off of school and use up the grace period, you’d enter repayment immediately. Kantrowitz notes there is usually a transition period of up to 60 days while loans are shifted from an in-school deferment to repayment status.
If you’re a military service member called to active duty for more than 30 days, your time away wouldn’t count toward the grace period and you’d have the full term available after returning.
Some private loan companies offer grace periods as well. Check with your loan servicer to be sure you understand whether you have a grace period and when your first payment is due…ReadMore…