Federal And Private Student Loan Grace Periods

Q: What are the terms for Federal and Private Student Loan Grace Periods, and how are they different from one another?

A: Once you graduate college, it is not typical for you to have to begin repaying your student loans immediately. Most student loans (federal and private) have a “buffer” period of time known as a “grace period”, in which you are not obligated to begin your student loan repayment. The lengths of a grace period can differ, from (the standard) 6 months all the way up to 3 years (if the borrower is serving on active duty in the Armed Forces). Many students are unaware that you do NOT have to wait until your grace period is over to began making student loan payments, in fact, for some student loans it is in your best interest to begin making your student loan payments as soon as you can to minimize capitalizing interest. If you are considering student loan consolidation, consolidating your student loans before your grace period is over can also be beneficial.

Stafford Student Loans
Stafford Student Loans have 6 months of grace period after graduation (or after you leave school or drop below part-time enrollment). You do have the option to start repaying your loan sooner to avoid interest capitalization. If you have subsidized Stafford Student Loans, interest will not accrue while you are in school, and/or during the grace period, because the government will pay the interest. However, if you have unsubsidized Stafford Student Loans, you will have the option to pay the interest during the in-school deferment and grace periods, or if you choose not to do so, the interest will be capitalized when loan repayment begins.

Perkins Student Loans
The grace period for Perkins loans is 9 months. However, Perkins loan borrowers attending college less than part time need to ask their their financial aid office for the specific time and terms of their grace periods. For Perkins loan borrowers, you should not be charged interest or have it accrue during the grace period of your loan.

Graduate and Parent PLUS Loans
PLUS Loans are a bit different because you do not have a grace period with these types of student loans. Typically you must begin repayment of your PLUS Loans within 60 days from the time the final loan is dispersed. Borrowers may also postpone loan repayment during ANY period in which the borrower qualifies for a student loan deferment.

a.) Parent PLUS borrowers may defer repayment for 6 months after the student (who they borrowed the loan for) is no longer in school.

b.) Graduate PLUS borrowers also have the option to defer repayment during the 6 months after they leave school. Depending on your specific loan agreement, the interest that accrues during the deferment periods will be paid monthly, quarterly, or added to the principal amount of the loan.

Private Student Loans
Private student loans typically offer grace periods, however since all private student loans are different, you need to ask your lender about the terms of your repayment, and when your repayment is expected to start. For almost all private student loans, loan interest will accrue while you are in the grace period and then be capitalized (it will be added to your principal loan balance) once you enter repayment. To avoid your interest capitalizing, you can choose to pay the interest during the grace period or enter repayment immediately. This is a basic overview of Federal and Private Student Loan Grace Periods. As always, you MUST check with your lender for your specific circumstances.