What Is a Student Loan Grace Period?
Carol Pope is a personal finance writer who has experience writing about auto, home and life insurance as well as auto loans and mortgage escrows. Before joining LendingTree, she was a full-time writer for Bankrate. Carol also spent more than a decade as a Geico insurance agent and earned her B.A. in English with a specialization in writing from the University of Michigan – Flint. When Carol isn’t writing, she enjoys running, gaming and growing food in her Florida garden.
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A student loan grace period is an amount of time directly after you leave college, during which you aren’t required to pay your student loans. Some loans give you an automatic grace period while others only make it available if you choose a deferred repayment plan.
Learn more about how student loan grace periods work and how to best use this time to your advantage.
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How long is a student loan grace period?
Your grace period is designed to give you some breathing room to find a job after leaving school. Grace periods are usually about six months long and start the day after you graduate, drop out or reduce your credit hours to below half time. Once your grace period is over, it’s time to make your first student loan payment.
How long your grace period is — or whether you get one at all — depends on the type of loan you have.
Grace periods for federal student loans
Most federal student loans have an automatic six-month grace period, as illustrated in the table below.
| Loan type | Grace period available | Grace period length | Does interest accrue? |
|---|---|---|---|
| Direct Subsidized | Yes | Six months | No |
| Direct Unsubsidized | Yes | Six months | Yes |
| Direct Grad PLUS | Yes, but as a deferment | Six months | Yes |
| Direct Parent PLUS | Yes, but as a deferment and only upon request | Six months | Yes |
You might notice that PLUS loans look a little different than the other Direct loans. How long is the grace period for PLUS loans? PLUS loans offer something similar to a grace period, called a deferment. The available deferment is six months. You can learn more about the difference between grace periods and deferments below.
Also, unlike the other types of federal loans, a grace period (or in this case, deferment) isn’t automatically granted on a Direct Parent PLUS loan. Instead, parents must request one when their child no longer meets the enrollment requirements.
Grace periods for private student loans
For private loan borrowers, the grace period for student loans depends on the lender. Although many private lenders do give you time before you have to start making loan payments, the length and whether interest accrues may vary. Additionally, your private student loan might only have a grace period if you choose a deferred repayment plan.
Because private student loans aren’t standardized like federal loans, comparing benefits and terms is vital when choosing the best private student loan for you. Check with your lender and find out how long the grace period is and if there’s any kind of minimum or interest-only payment required.
Is there interest during a student loan grace period?
Unless you pay your student loans while you’re in school and during your grace period, interest will accrue (except for those with a Direct Subsidized Loan). This is also typically the case with private student loans.
When your grace period is over and you enter repayment, this accrued interest is added to your total loan balance, forcing you to pay interest on your accrued interest. This process is called interest capitalization, and could ultimately lead you to owe more than what you borrowed.
You could also make interest-only payments while in school to ensure you won’t owe more money by the time you graduate, and the monthly cost would still be lower than normal student loan payments.
Should I make payments during my student loan grace period?
Many borrowers don’t have to start paying their student loans directly after college, but choosing to forgo your grace period may prove to be wise. Starting repayment as soon as possible could help you for several reasons.
Get a better understanding of your budget
Graduating from college is a major milestone — one that comes with a lot of life changes. You might be starting a new career, hopefully with a higher salary than you’re used to. If so, this could be the perfect time to revamp your budget, and immediately beginning your student loan repayment can give you a better idea of your expenses.
For instance, let’s say you need to move across the country for your first post-college job. Your job is in a high-cost area and you wind up spending a lot on rent. You’ll need to take student loan payments into account, even if you’re in your grace period. If you start making payments right away, you’ll get used to having them be part of your budget and ordinary expenses. You can also take them into account by using a repayment calculator to help you with your budget.
Pay your loan off faster
Making payments when they aren’t required or paying more than the minimum amount due means you’ll pay off your student loan faster. Putting your student loan debt in your rearview mirror may help improve your creditworthiness by improving your debt-to-income ratio. You’ll also have more funds available for retirement investments or purchasing a home.
Use our student loan prepayment calculator to see the impact that making extra payments on your student loans can have on your overall balance.
Save money on interest
In addition to possibly improving your credit and giving you a better understanding of your budget, skipping your grace period has the potential to save you a substantial amount in interest. If you can’t swing full payments, consider making interest-only payments.
Frequently asked questions
Sort of. Although you won’t be technically extending your grace period, if you meet certain guidelines, you can put off your payments through deferment or forbearance. Going back to school part time may also be an option, since all federal student loans (and most private loans) are deferred as long as you’re enrolled at least half time.
Yes, making late student loan payments can negatively impact your credit score, but it depends on how late your payment is. The government considers you delinquent if you’re just a day late, and reports you to the credit bureaus once you’re 90 days past due. Depending on your loan, you could face default after 270 days.
Your private lender may have different time frames for credit reporting, so check your promissory note for more information.
With deferment, you’ll normally accrue interest on your student loans. Deferment is not always guaranteed, and you may have to apply for it. Grace periods are written into your student loan contract, and if you have a Direct Subsidized Loan, interest won’t accrue during the grace period.
Most federal student loans (and some private ones) offer a grace period while you’re enrolled in school and six months after you leave or graduate from school or drop below half-time enrollment. A deferment can also allow you to temporarily pause your payments while you are attending school, experiencing financial hardship, undergoing cancer treatments or during other qualifying events.