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When you graduate college or drop below half-time enrollment, most student loan lenders offer a grace period. A student loan grace period is a break between when you graduate and when you have to start repaying your student loans. A grace period allows you to start establishing income in order to begin making full student loan payments, though you can choose to start repaying your loans earlier.
What is a grace period for student loans?
A grace period for student loans is the period after you graduate or drop below half-time enrollment and before you’re required to start making student loan payments. For most student loans, grace periods last six months, although you won’t be punished if you start to pay them off sooner. The purpose of a grace period is to allow you time to find a job after college before you’re required to start paying your student loans.
How long is the federal student loan grace period?
Most federal student loans offer a six-month grace period:
- Direct Subsidized and Unsubsidized Loan borrowers get a six-month grace period.
- PLUS loans used for graduate or professional students will automatically be enrolled in a six-month deferment.
- Parent PLUS loan borrowers can request to be enrolled in a six-month deferment after their child graduates or drops below half-time enrollment.
With the exception of Direct Subsidized Loans, federal student loans will accrue interest during your grace period or post-graduation deferment.
How long is the private student loan grace period?
Many private student loan lenders try to give borrowers the same grace period that federal student loan borrowers receive. Examples include:
- Sallie Mae: Six months.
- Earnest: Nine months.
- Citizens Bank: Six months.
- College Ave: Six months for undergraduate loans and nine months for graduate loans.
If you’re unsure if you have a grace period, review your loan agreement or contact your lender.
Can you extend the grace period on student loans?
In almost every instance, you can’t extend your student loan grace period. The only time a grace period can be extended on federal student loans is if:
- You return to at least half-time enrollment before your grace period is up.
- You’re called to active military duty before your grace period is up.
If your grace period is already up but you need more time to get your affairs in order, you can request to put your loans in deferment or forbearance. Both of these temporarily pause your federal student loans for a set number of months. Interest will continue to accrue, but you won’t be penalized if you don’t make payments.
If a private student loan lender offers a grace period, you’ll need to check with your individual lender to see if it offers any deferment opportunities. Some lenders offer this on a case-by-case basis.
Benefits of a student loan grace period
A grace period is an extra buffer before you have to start making payments on your student loans. Many graduates appreciate the time after graduation to secure a job that allows them to make the payments. Once you get a job, a grace period allows you to assess your monthly income, craft your budget and determine whether you need to request a different repayment plan once the grace period ends.
A grace period particularly benefits borrowers who have Direct Subsidized Loans. These loans do not accrue interest until after the grace period ends, so there is little downside to taking advantage of the grace period.
Should you make payments during the grace period?
While the grace period is nice to have, the main downside of one is that most loans will accrue interest during that time — so when you enter repayment, all of that accrued interest will be added to your principal loan balance.
The good news is that you can choose to make payments during your grace period if your finances allow for it. You might want to make payments during the grace period if:
- You get a job straight out of college that gives you enough income to make payments.
- You have unsubsidized, parent PLUS or private student loans that accrue interest during your time in school as well as during the grace period.
- You’re up to date on your other bills and have enough money to start making payments early.
- You want to lower your total interest owed by making interest-only payments.