When referring to student loans, what is a grace period?

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Over the past 20 years, college costs have risen by over 134%. As tuition grows each year, students turn to financial aid to afford higher education.

Scholarships are recognized as the most desirable form of financial support, as all funds are provided for free. There is no expectation to pay it back later giving more financial liberty to students in college.

In fact, you can explore Bold.org's diverse array of scholarships and grants to pay off student loans to support your collegiate career today.

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With the competitive nature of scholarships, students may not always get an adequate amount of money to fund their entire education.

To fulfill any of these remaining funds, it is not uncommon for college students to take out student loans. Student loans are essentially borrowed money from either the government or a private loan servicer.

Since the money is borrowed, undergraduate and graduate students are required to make student loan payments to return it back.

Every source has a different student loan repayment timeline, with some offering a grace period. Most federal and private student loan lenders understand that students may not be able to afford monthly payments during school enrollment.

This student loan grace period is a timeframe students are exempt from making monthly payments. It is only after this grace period ends that borrowers are forced to begin repayment.

With that being said, student loan borrowers are of course welcome to pay off loans before the grace period ends, but are not required.

In most federal student loans and some private ones, interest still accrues during this time. While a grace period gives you the opportunity to save a little more money, it is not to say that interest will not increase the monetary value of your student loans.

Interest, the main culprit behind the student debt crisis, is the extra charge for borrowing student loans. As interest rises over time, people find themselves drowning in affording each student loan payment.

Sometimes, if you can, it is best to pay a little and get ahead during the grace period. Students might consider paying interest-only payments so that their payments can be subtracted from the principal balance.

In addition to working jobs, one might consider applying for scholarships throughout college to reallocate those savings into student loan payments.

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How long is a typical grace period for student loans?

For those that have them, every source will have its own grace period. Depending on whether it is a federal or private loan will be a good indication of what to expect.

Federal loans

The majority of federal loans install a six-month grace period after graduating for student borrowers. This gives them about half a year to achieve stability through work, housing, and income prior to tackling the loan balance.

This grace period is given automatically upon receiving the loan and is activated once the student is under half-time enrollment at their University.

The Federal parent PLUS loan for parents is the only federal loan that has a slight differentiation. PLUS loans borrowed by parents for their child offer no grace period and are expected to be paid right away.

However, parents can request a deferment, which is an extension on student loan repayment. Similar to a grace period, the timeframe for this is usually 6 months after the borrower's child has dropped below half-time enrollment.

Private student loans

Since there are a variety of sources where private loans come from, there is unfortunately no singular answer. It depends on the loan servicer as some can provide one while others expect loan payments right away.

In this specific case, it is best to reach out to your provider and go over these details in your contract before signing. Since most federal student loans guarantee a six-month grace period, some private loans also opt for a similar grace period schedule.

Do all student loans have a grace period?

Unfortunately, no, they do not.

Given the difficulties that arise with being a student, grace periods are essentially a luxury. The delay in student loan repayment allows you to save some extra money during college and for some time after graduation, but not all providers prioritize that.

For the most part, all federal student loans guarantee a student loan grace period unless the loan borrower is a parent with a separate source of income.

In addition to the government, loans are sourced from a variety of different banks, agencies, credit unions, and other private organizations. Each one implements its own rules and regulations regarding grace periods.

It is not uncommon for private student loans to not offer a grace period, and it is completely contingent on your loan provider.

Reach out to your loan servicer as soon as possible to pick a plan that has one!

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How does a grace period work?

For student loans that offer one, grace periods are built into your agreement. This means that the timeframe for the grace period will be automatically applied upon receiving your student loan.

There is also nothing additional for students to do as it will be documented from their end.

No monthly payment will be expected of you nor billed until the grace period window is over. Since most student loans do not require payment during full-time enrollment, the grace period usually begins once the student graduates, drops below half-time enrollment, or leaves school early.

Only once this window closes, the respective loan servicer will begin billing you for student loan repayment.

This can range from a couple of weeks to a couple of months after graduation depending on the source.

What is the difference between a grace period and a deferment?

Both a grace period and deferment offer a quick pause on student loan repayments to provide extra time to be updated on monthly payments. Both are great for dealing with current financial hardship without it affecting your credit report.

Grace periods are clearly stated in your loan agreement and will accordingly be applied. Oftentimes, no additional paperwork is needed.

Unlike grace periods, deferments have to be applied for as they are not automatically granted to the borrower. If you find yourself having trouble making payments at any time during the repayment of a student loan, you can request a deferment to temporarily stop making payments.

There is no restriction on it to be immediately after graduation as it is with a grace period. In most loans, you can have both at some point. Keep in mind, however, there is no guarantee that you will always be eligible for one, so apply with caution.

While it can be helpful, interest accrues during this time and quickly make these payments overwhelming once the deferment period is over. Consider turning to other outlets such as scholarships first.

Explore our grants specifically for paying off student loan debt.

Are student loans suspended?

Following the Covid-19 pandemic, all federal direct student loans have been suspended until December 31, 2022. This means that payments are put on pause with 0% interest accruing.

While borrowers are encouraged to make these payments they are not required to until the public student loan suspension is lifted later this year.