Student Loans

What Is a Student Loan Grace Period?

You don't have to make student loan payments during your grace period, but to keep your balance from ballooning, pay off accrued interest.

Brianna McGurran, Ryan LaneAugust 11, 2020

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A student loan grace period is a stretch of time, after you’ve graduated or left school, when you’re not required to make payments.

If you graduated in spring 2020 and your federal student loan grace period is expected to end this fall, your first payment won't be due until January 2021. That's because there's an automatic forbearance — payment pause — interest-free through the end of the year. That also means your loan won't collect interest during this forbearance as it usually would during a grace period.

Here’s what to know about your student loan grace period and how to make the best use of this time.

How long is a student loan grace period?

A grace period’s length depends on the type of student loan you took out. Here’s how much time you’ll have before repayment starts for different loans:

  • Federal direct subsidized and unsubsidized loans: Six months.

  • Federal Stafford subsidized and unsubsidized loans: Six months.

  • Federal direct PLUS loans for graduate students: Six months.

  • Federal direct PLUS loans for parents: Six months, if requested on the loan application.

  • Federal Perkins loans: Nine months.

  • Private loans: Varies by lender. Some offer a post-graduation grace period of six months, while others require payment as soon as the loan is disbursed. Check your loan agreement or ask your lender if you’re not sure.

For federal student loans, grace periods start when you fall below half-time enrollment, which can occur by graduating, withdrawing or dropping classes. Schools have different definitions for half-time enrollment, so check with your financial aid office if you change your class schedule.

If you re-enroll at least half-time before your student loan grace period ends, you’ll receive its entire length in the future. For example, say you start grad school full time five months after graduating. When you finish your graduate program, you’d still have the full six-month grace period for your undergraduate loans. 

Does interest accrue during the grace period?

Interest will accrue during your grace period unless you have federal direct subsidized loans — just like it did while you were enrolled in school. If that interest capitalizes, you’ll have a bigger balance when your loan enters repayment.

Paying student loans during the grace period

The student loan grace period may be a welcome breather if you’re looking for a job or moving. But if you can, taking this opportunity to prevent interest charges from ballooning could help you pay your loans off early. Try these options:

Make monthly payments as though there’s no grace period

This will help you budget around student loan payments from the start, preventing an unhappy surprise when your bill eventually comes due. Federal student loan exit counseling, which happens around graduation, will show how much you owe per month. If you’re not sure, contact your student loan servicer or private lender. Even if you choose to start paying back the loan early, you're not committed to making payments each month during your grace period. You’re on the hook for the bill only when your repayment term officially starts.

Pay off interest before it capitalizes

Can’t afford a full payment right now? Pay at least enough to cover the monthly interest that accrues. Or, before your grace period ends, pay off the accrued interest before it’s added to your balance, or capitalized. You’ll most likely receive an email or letter from your student loan servicer letting you know this is an option.

Enter your balance with and without the interest you owe in a student loan payoff calculator to see how much these strategies could save you.

Find out what your loan payment will be

Find out who your student loan servicer is before your grace period ends — they're the company that will send you a bill, collect your payments and help you manage your repayment plan.

If you think you'll have trouble making your loan payment each month, you can modify your payment before you get your first bill. Ask your servicer about enrolling in an income-driven repayment plan. It caps your payments at a portion of your income and extends repayment.

If you want to repay your loan on an income-driven plan, apply at least two months before the end of your grace period so your application has time to process. If you apply too early, your loan servicer may ask you to reapply closer to the end of your grace period.