College | September 22, 2023 | Lisa Litant
How to make the most of your student loan grace period
What you'll learn
- What a student loan grace period is
- How long your grace period will last
- When your payments will begin
- How to prepare for payments during your grace period
When you graduate or leave college, you’ll usually enter what’s known as a grace or separation period for your federal and private student loans.
Here’s the info and tips you need to understand what this period is, and how to make the most of it as you get ready to pay back your student loans.
What is a grace period?
A grace period (sometimes referred to as a separation period) is the time—usually six months—between school and when you’ll need to start making principal and interest payments on your student loans. Lenders give you a grace period so you’ll have time to transition from school to post-college life and get settled financially before your payments start.
When your grace period ends, your monthly payments will include principal and interest until your loan is paid off—and these will be higher than any in-school payments you might have made.
- Principal: the amount you borrowed, plus any unpaid interest
- Interest: the amount you’re charged for borrowing the money
What will you pay and when?
If you originally 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-school payments, you’ll generally continue those during grace. Your servicer will let you know when your first payment will be due—and how much it will be.
Tip: 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.
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 period.
- Organize your loan info: Create a spreadsheet of your federal and private student loans—and list the loan servicer for each. What if you don’t know your servicers or what loans you have?
- For federal student loans, go to the National Student Loan Data System.
- For private student loans, request a free credit report from annualcreditreport.com. You’ll be able to see which loans have been reported to the consumer reporting agencies.
- 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. 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 help starting a budget and planning your financial goals, use this free budgeting worksheet.
Make payments during your grace period
Even though payments may not be required during this time, you can still make payments. 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. Here are some 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 monthly payments, the smoother your transition can be. And you’ll be on your way to paying off your student loans in full.