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How to Make the Most of Your Federal Student Loan Grace Period

student loan grace period

Graduating from college is an incredible accomplishment! Your federal student loans reward you with a six-month grace period before you have to start repaying your debt.

But you may not want to put your federal student loans out of mind for those six months. Here are some ways to make the most of your grace period.

Get to Know Your Loans

Before your grace period is over, take your student loans on a date. Carve out some time to sit down and look through your loans. You may have taken out multiple loans each semester you were in school. As a result, you may have different kinds of loans with different interest rates. If you don’t know, learn the difference between subsidized and unsubsidized (hint: the government pays the interest on the subsidized loans while you’re in school).

Decide on Your Repayment Plan

Once you know your loans like the back of your hand, weigh your repayment options during your grace period. Federal student loans come with a variety of methods to repay your debt. The standard repayment plan sets a fixed monthly payment that allows you to pay your loans off in 10 years. While this is the standard plan, it doesn’t mean this is the right plan for you. If you have a lot of student loan debt, the standard repayment plan will hit you with a steep monthly payment that you may not be able to afford.

If that doesn’t work for you, there are various income-based repayment plans, which may be better suited to your needs. One of the benefits of federal student loans is that you’re able to change your repayment method at any point over the course of your loans. If you’re on an income-based plan, you’ll need to reapply each year to give your updated income information.

Factor Your Loans into Your Budget

Your grace period gives you time to prepare for the impact your student loan payment will have on your budget. Graduating college also means that your overall financial situation is changing. Whether you’ve got a job or you’re still looking, paying rent or living at home, you’ll be setting a new budget. By choosing your repayment plan, you’ll have an idea of what your monthly payment will be. The grace period allows you time to figure out how that fits into your budget. In fact, your student loan payment may have bearing on how much you’re comfortable paying in rent or how much you’re looking for as a salary.

Start Making Payments

If you’ve started making money or have money in savings set aside for your student loans, you can start making payments during your grace period. Federal student loans allow for penalty-free prepayment. Subsidized loans will not accrue interest during the grace period, but unsubsidized loans will. Therefore, it will save you money, in the long run, to start making payments on your unsubsidized loans as soon as possible.

Things to Know About Grace Periods

Grace periods are only offered once per loan. If you make use of your grace period after completing your first degree and decide to go back to school, you will not have another grace period after you complete your second degree. New loans, however, will be eligible for a grace period. Additionally, if you consolidate your loans during a grace period, you lose what’s left of the grace period.

Your grace period is not meant to be a time to ignore your student loans. Instead, it serves as a time to get your financial bearings and prepare to start making your payments. Learning more about your loans, and even beginning to make your payments, will be beneficial in the long run.

If you’re struggling with student loan debt, call the student loan debt professionals at Tayne Law Group!

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