For most federal student loans, you get a break between the end of school and the beginning of your repayment journey. This time, usually about six months after you graduate, is called a grace period.
A grace period can also exist without graduation. If you drop below half-time enrollment, you might have to start paying your student loans back six months after the change.
Regardless of how your grace period ends, make sure you understand how it impacts your student loan repayment plan.
Which student loans have grace periods?
While most students have grace periods, not all them do. The federal student loans that offer grace periods include the subsidized and unsubsidized Federal Direct Stafford Loans.
Federal Direct PLUS Loans for parents and graduate students technically don’t have a grace period and enter repayment 60 days after full disbursement. However, since July 1, 2008, Grad PLUS and Parent PLUS loans may be deferred during the six months after the student graduates or drops below half-time enrollment.
Federal Perkins Loans, which are no longer originated, have a nine-month grace period.
Federal Direct Consolidation Loans do not have a grace period and will enter repayment within 60 days of disbursement.
If you consolidate your federal student loans during the grace period, you’ll lose that cushion of time before repayment starts. You can tell your loan servicer in your consolidation application that you want the consolidation to be processed at the end of the grace period. This can help when you start repayment — your federal loans will be consolidated and you’ll still get your grace period.
Private student loans, which are made by private lenders rather than the U.S. Department of Education, have their own rules on repayment. Most offer a six-month grace period, but they are not required to do so. If you have private student loans, check with your lender to see if you have a grace period, how long it is, and when repayment for your loan starts.
How do you know when your grace period is over?
It can be easy to lose track of time. Graduating college, starting a new job, and possibly moving out of the area can be stressful and time-consuming. While a grace period should help you get settled into life after graduation, everyone’s situation is different.
Because of this, you might not realize how quickly repayment will start. Your loan servicer is required to provide you with a loan repayment schedule. It’ll show you when the first payment is due, the amount you owe each month, and the expected time it’ll take to pay off.
If you’ve recently moved, tell your lender as soon as you can about your new address. That way you’ll get all the necessary documents at your new place without worrying about missing a payment. You’re obligated to keep your lender updated on your new address, so don’t miss this step. It’s important that they can contact you regarding any changes in your loan.
It is a good idea to add a note to your calendar two weeks before the first payment is due. If you haven’t received a statement or coupon book from the loan servicer by then, call the lender to ask where you should send your payment. Your payment is due even if you haven’t heard from the lender.
How to avoid missing a payment after your grace period ends
It’s easy to forget about paying back your student loans. When they’re out of sight, they’re out of mind. But missing a payment can hurt your credit score.
Payment history is the biggest determining factor in your credit score, and a late payment can cause your credit score to drop. This means potential lenders might consider you to be irresponsible with credit. Being late or missing payments entirely can hurt your chances of getting a low-interest car loan or approved for a credit card or mortgage. It’s easy to miss your first payment, since you’ve never made one before, so keep this in mind as your grace period ends.
Regardless of circumstance, try to make the required payments on time every month. Start with adding calendar reminders of when your student loan payment is due. If you have multiple loans, make sure you add each of their due dates, if they differ by more than a day or two.
You can also set up auto-pay to have your loan servicer automatically deduct your monthly payment from your bank account every month. Some lenders offer discounts on your monthly payments if you opt into auto-payments. It’s a win-win for both sides: you get a discount and your lender gets their money on time every month.
Prepare for payments after the grace period
While grace periods are meant to give you a cushion before repayment starts, they can also cause you to lose track of time, especially if you move in the interim. Take a few steps to make sure you don’t miss a payment, to protect you and your credit.
Since not all loans have grace periods, review each of yours to see which ones qualify. Start payments immediately on the ones that don’t give you a cushion, like some private student loans. Then set up future loans to be paid when the grace period ends. As long as you’re preparing your finances to pay off your loans after the grace period, you’ll avoid missing payments.