Federal Loan Grace Periods Explained
College students really get a great deal when it comes to student loans. Why is this, exactly? Well, unlike a standard loan that you would get from the bank, student loans often have grace periods. This means, that while you are in school you will not have to make payments on your loan. Nor, will you have to make payments for some months after you graduate.
Could it get any better than this, really? College students have it tough as it is, so you can imagine how having to pay back a loan while going to school, holding down a job and maintaining any sort of sanity would be difficult at best.
All Federal Student Loans Have This In Common
Save for PLUS loans, which parents must begin payment on immediately, all Federal Loans, subsidized or unsubsidized, have a grace period where students do not have to start repaying them off until at least six months after graduation, leaving school, or dropping below half-time enrollment.
If your loan is subsidized, this means that the interest that accrues on the loan while you are in school is paid for by the federal government. When it comes time for you to pay your loan back, you will not be responsible for this interest.
If your loan is unsubsidized, however, you will be responsible for the interest that accrues on the loan while you’re in school. So even though you have a grace period where no payments are necessary, the interest still builds on the loan amount.
While In Your Grace Period
During this grace period, students will receive repayment instructions, and the due date for their first payment, which is then due monthly. When you graduate or leave school in any capacity, be sure to find out exactly how long your grace period is. The Federal Stafford Loan has a six month grace period, but the Federal Perkins’ Loan has a nine month one. You can find out your grace period by checking your loan’s promissory note for the specifics on what you agreed upon.
When The Grace Period Is Not Enough
It is also possible, for former students that have yet to find work or have fallen on hard times, to get a determent or forbearance for certain loans, usually another six-months to a year before payments start again. Loans can also be deferred if a graduate or former student returns to school. You must make sure, however, that your deferment is granted before you stop making payments, otherwise you run the risk of defaulting on the loan. You never want to default on a loan because not only does it tarnish your credit rating, it is also very difficult to get out of and can make it next to impossible to secure any future educational loans.
During the grace period or a deferment, students and parents are not charged interest on subsidized FFEL’s or FDLP’s. Unsubsidized loans, however, continue to accrue interest.
You Can Always Consolidate
Towards the end of the loan grace period, students often decide to consolidate a number of their separate loans into one lump loan. There are many stipulations with student loan consolidation that you have to watch out for. Some loans forbid consolidation, others simple cannot be consolidated if they are from two very different sources. Not only does consolidation cut down on the different bills one must pay every month, it also often freezes the interest rate of the loans, so that the rate cannot fluctuate.
Many private loans grace periods range from immediate payment to year-long grace periods. Federal Loans, meanwhile, are not paid off till after graduation.
.