The first step to strategizing how to pay your student loans is understanding when your repayment period begins.
Federal student loan repayment begins, for most federal student loans, after the borrower leaves college or drops below half-time enrollment (less than six credits).
For PLUS loans repayment begins once the loan is fully disbursed.
Before repayment begins, the loan servicer or lender will provide the borrower with a loan repayment schedule that states the schedule of payments including the date the first payment is due and the amount of each payment.
Before repayment begins, the loan is automatically placed in a grace period.
The grace period is a short period of time after the borrower graduates, leaves school, or drops below half-time enrollment before repayment begins. The grace period gives the borrower some breathing room to get his or her financial house in order and to select a repayment plan.
Not all federal student loans have a grace period, and for most loans, interest will accrue during the grace period.
What Loans Have a Grace Period?
- Direct Subsidized Loans,
- Direct Unsubsidized Loans,
- Subsidized Federal Stafford Loans, and
- Unsubsidized Federal Stafford Loans (six-month grace period).
What Loans Do Not Have a Grace Period?
- PLUS loans have no grace period. They enter repayment once the loan is fully disbursed.
- Grace periods for Federal Perkins Loans depend on the school where the borrower received the loan.
Can the Grace Period Change?
Under certain situations, the grace period may be extended:
- Active duty military – If the borrower is called to active military duty for more than 30 days before the end of the grace period, repayment will begin six-months after the borrower returns from service.
- Enrollment in school before the end of the grace period—If the borrower reenrolls in school at least half-time before the end of the grace period, the borrower will receive a full six-month grace period when he or she stops attending school or drops below half-time enrollment.
- Loan consolidation—If the borrower consolidates his or her loans during the grace period, the borrower gives up the remainder of the grace period. Repayment then begins immediately after the Direct Consolidation Loan is disbursed. The first bill on the Direct Consolidation Loan is due approximately two months after disbursement.