Student Loan Grace Period: What You Need To Know Before Repayment Starts
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All federal student loans — and some private student loans — have a six-month grace period. You don’t have to start paying your monthly student loan payments until after the grace period ends. Interest will accrue, though, during the grace period. If you have a subsidized federal loan, the government will pay the interest. If you have an unsubsidized loan, you’ll be responsible for paying the interest. The grace period begins after you either graduate, leave school, or drop below half-time enrollment. Borrowers can think of the grace period as a time to look for employment and get their finances in order before the first payment is due.
Written by Attorney Jenni Klock Morel.
Updated July 12, 2023
What Is the Student Loan Grace Period?
The grace period is the time you have before your student loan payments begin. It starts after you graduate, drop out of school, or drop below half-time enrollment. The grace period for most federal student loans is six months. This includes:
Federal Direct Loans
Federal Stafford Loans
Federal Direct PLUS loans for graduate students
Though they are no longer issued, federal Perkins Loans had a nine-month grace period.
Some private student loans offer borrowers a grace period. You’ll need to consult the terms of your loan or ask your private lender to see if you’re entitled to a grace period on your private loans.
Is There a Grace Period After the Government Payment Pause Ends?
Not exactly. The grace period specifically refers to the time after you graduate or leave school. The nationwide student loan repayment pause was a temporary, pandemic-related payment pause. It’s set to end in October 2023 when payments will resume.
That said, since Biden’s student loan forgiveness plan was struck down by the Supreme Court in June 2023, Biden has been working to create a longer on ramp to help student loan borrowers adjust to having a monthly student loan payment again.
You should do your best to make your monthly payment and/or find an affordable payment plan. But during the first year of repayment, “missed, partial, or late payments will not lead to negative credit reporting, default, or loans being sent to collection agencies,” according to the U.S. Department of Education.
Does Interest Accrue During the Student Loan Grace Period?
Yes, interest accrues during the grace period. However, depending on the type of loan you have, you may not be responsible for paying it.
The U.S. Department of Education pays the interest on Direct Subsidized Loans during the grace period. The borrower is responsible for paying the interest for Direct Unsubsidized Loans during grace periods.
The majority of federal student loans are unsubsidized, meaning interest begins to accrue as soon as the loan is dispersed. If you don’t pay the accrued interest after the deferment period (such as the grace period), it will be added to the principal balance of the loan. This is called capitalization, and it ultimately makes your loans much more expensive.
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Can You Extend the Grace Period on Student Loans?
Not usually. And the grace period is generally only available once per loan. However, if you return to school at least half-time before the grace period ends, then your grace period clock is reset. Any new student loans taken out during a return to school will come with a grace period.
Another way that a federal student loan grace period is extended is through active duty military service. If you’re a student loan borrower who is called to active military duty for more than 30 days before the end of the grace period, it will reset and you will receive the full grace period upon return from active duty.
You can also apply for deferment or forbearance after your grace period ends if you’re experiencing financial hardship.
Private student loan lenders may offer a grace period extension or other deferment or forbearance options. Check directly with your lender to learn about the repayment options available to you.
What Can I Do During the Student Loan Grace Period?
The grace period was designed to give borrowers time to make a financial plan and find a job before student loan payment begins. If you’re prepared to do so, you can start paying your loan right away. This can also be a good time to consolidate your loans to streamline your payments.
Can I Pay Student Loans During the Grace Period?
Yes, if you would like to you can make payments on your student loans during the grace period. If you aren’t ready to make full payments you can pay off the accrued interest. This way, when your grace period ends the interest is not capitalized and added to the principal loan balance.
Be aware that any payments you make during the grace period will not count as qualifying payments in the Public Service Loan Forgiveness (PSLF) program. You can’t waive the grace period.
Can I Consolidate My Student Loans During the Grace Period?
Yes, you can consolidate your student loans during the grace period, but you’ll need to inform your loan servicer if you want to delay entering repaying on consolidated loans that are still in a grace period.
Loan consolidation combines all of your student loans under one new loan with one monthly payment with a fixed interest rate. The interest rate will be the weighted average of all your current interest rates.
If you don’t tell your loan servicer you want to delay repayment on loan consolidation (during the grace period), you’ll lose the remaining time on your grace period once your consolidation is processed.
Is the Grace Period the Same as Student Loan Deferment?
The grace period is one of several types of deferment.
There are other types of deferment as well. For example, you may qualify for student loan deferment if you’re performing military service, experiencing economic hardship, or undergoing cancer treatment.
Federal student loan servicers must grant deferment for borrowers who meet eligibility requirements.
What’s the Difference Between Deferment and Forbearance?
Deferment and forbearance are often discussed together since they provide a temporary reprieve from making loan payments. There are a few differences though.
While interest accrues during deferment and forbearance periods, the federal government will pay accrued interest on subsidized loans in deferment. If you have unsubsidized loans, you’ll ultimately be responsible to pay the accrued interest, which can really add up!
Regardless of whether your loan is subsidized or unsubsidized, interest accrues during periods of forbearance and you, the borrower, are ultimately responsible for paying it. You can make an interest-only payment while your loans are in forbearance, but you aren’t required to do so.
What Happens if I Can’t Pay My Student Loan After the Grace Period Ends?
After your grace period, your loan servicer will put your loan on the Standard Repayment Plan (SRP). You can request a different repayment plan at any time. If you can’t afford the payment amount on the 10-year SRP, look into an Income-Driven Repayment Plan.
If your grace period is ending and you are not able to make your student loan payments, contact your loan servicer to discuss your options. Tell them your payment amount is too high. Not sure who your servicer is? Check your account on StudentAid.gov or run an NSLDS report.
Do your best to avoid missing or being late on your student loan payments. Defaulting on your student loans will harm your credit report and credit score. You’ll have some leeway with this in 2023, but those benefits are limited.
