Grad school  |  June 20, 2022  |  Lisa Litant

Your Student Loan Grace Period: How to make the most of it

What you'll learn
  • What a student loan grace period is
  • How long the grace period is
  • How to make the most of your grace period

When you graduate or leave college, you’ll usually enter what’s known as a grace or separation period for your student loans. What’s a grace period? It’s a time—usually six months—after you leave school before you need to start paying back your student loans with full (principal and interest) payments. The reason lenders give you a student loan grace period is so you’ll have time to transition from school to post-college life, and get settled financially before you have to make loan payments. 

What will you pay and when?

If you chose to defer making payments while you were in school, you won’t have to make payments during your grace period either. But if you’ve been making in-college payments, you’ll generally continue those for the six months. In all cases, when your grace period ends, your monthly payments start to include principal and interest until your loan is paid off. Usually these will be higher than any in-school payments you may have been making. 

  • Even though you don’t have to make payments during grace/separation, If you can make some—no matter how small—they’ll help you save money on your loan over the long run.
  • Check with your loan servicers to confirm how long your grace period is.  
  • Your payments going forward will include principal and interest.
    • Principal: the amount you borrowed, plus any unpaid interest
    • Interest: the amount you’re charged for borrowing the money 

What you can do during your grace period

Here are some tips for getting ready to pay back your student loans during your six-month grace or separation period.

  • Organize your loan info: Create a spreadsheet of your federal student loans and private student loans—and list the loan servicer for each. What if you don’t know your servicers or what loans you have?
  • Find out how much your payments will be and when they begin. You can get this info from your loan servicer. You can also use online calculators (like this Student Loan Repayment Calculator) to estimate your payments using your loan total and interest rate.
  • Sign up for any available discounts, like auto debit, that your servicer offers, so you can save money.
  • Be sure to read emails/letters from your loan servicers, so you don’t miss out on important dates and info.
  • Put your job search in high gear. A great way to get your first—or second or third—job out of college with a service like Handshake. (And as you’re interviewing with companies, see if they offer a student loan repayment benefit!)

Create a budget 

Your grace period is a good time to figure out how your money flow’s going to work now that you’re out of school. Creating a budget can help you understand the balance of income with monthly expenses like rent and food…and student loan payments. For free help starting a budget and planning your financial goals, YourMoney Pro can help.

Make payments during your grace period

Even though payments may not be required, you can always make payments during grace/separation. Paying even a little extra will help you get ahead and lower the amount you owe. Plus, it can help you reduce your total loan cost. Every little bit helps to pay down your loans in the long run. Get more tips on how to pay off your student loans faster

Your grace/separation period is all about planning. The more you can do during your grace or separation period to prepare for your full monthly payments, the smoother your transition can be. And you’ll be on your way to paying off your student loans in full. 

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