How to maximize your time

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A grace period on a student loan is the temporary window of time before you need to start paying your debt. Grace periods typically last six months after you graduate or fall below mid-term enrollment. Once your grace period has expired, begin paying the student loan in full. Here are some ways to maximize your grace period before the repayment begins.



a person wearing a suit and tie in front of a crowd: college graduation audience


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College Graduation Audience

This is how credit grace periods work

Grace periods are a built-in respite before you have to begin paying back your loan. For college students, grace periods give you the time to find employment and generate income to make your monthly loan payments.

When do I have to repay student loans?

To the Student Loans grace periods, the clock will start ticking as soon as you graduate, fall under mid-term enrollment, or otherwise cease being a full-time student. The grace period is usually six months, although some private student loans have grace periods of up to a full year. Private student loan lenders may also offer longer grace periods to students who opt for a scholarship or residency.

Does my student loan have a grace period?

Whether or not you have a grace period depends on the type of loan you have taken out.

Federal Student Loans

Federal loans with a six month grace period include:

  • Direct Subsidized Loans.
  • Direct unsubsidized loans.
  • FFEL program loan.

Exceptions to the six-month grace period are:

  • Federal loans PLUS. Repayment of federal PLUS loans begins once all of the money has been paid out. However, graduates and professionals receive an automatic six-month period Postponement, and parents can request a six-month grace period after their child graduates from high school, leaves school, or falls below mid-term enrollment.
  • Federal Perkins Loans. For students attending part-time or more, the Perkins loan grace period is nine months. If you are attending less than half the time, you will need to contact the school’s grant department for the length of the grace period. (The school, not the federal government, acts as the lender for Perkins loans.)

Private student loans

Most private lenders offer grace periods for student loans, which usually last six months. In certain cases, a private lender may give a six month grace period for undergraduate loans and nine months for students who have a professional degree in areas such as Law, medicine and Companies.

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Make the most of your grace period

Once you’ve checked the terms of your loan and confirmed the due date of your first payment, the real work begins. Follow these tips to prepare for the end of your student loan grace period and beyond.

Measure debt against income

Multiply your monthly student loan payment by 12 and subtract that number from your annual salary (or your desired salary if you’re still looking for a job). The result gives you a rough idea of ​​your student debt compared to your income. Put your budget corresponding.

Make a loan repayment plan

The end of your grace period could come as a shock if you are not prepared for your full monthly payments. Remember, payments include both your principal amount and any interest expense on that amount. Before you start paying, create a Loan repayment plan.

If you have a federal student loan, you can go with one Income-based repayment plan to keep your payments down. If you have a private student loan, you can make multiple payments each month or adjust your budget to help settle your debt faster.

Start saving now

Six or nine months may seem like a long way off, but don’t get complacent. You might even want to set up a separate checking or savings account and block it for all other expenses.

Get a head start if you can

Just because you haven’t paid yet doesn’t mean you have to wait. For example, many student loans accrue interest during the grace period. You can reduce your aggregate debt by paying interest immediately. You can also choose to ask the lender if you can make payments on the principal during the grace period.

Use your professional advantages

When you’ve found a job and are immediately eligible for benefits such as health insurance or 401 (k) savings, consider choosing the options that will have the least impact on your take-away salary. For example, you can opt for an inexpensive “bronze” dental plan instead of the more expensive “gold” plan. You can always sign up again for more robust benefits once you’ve reduced your debt.

Manage all of your debts

If you have other types of debt, such as For example, a car loan or credit card balances need to be kept under control. Many experts see a debt-to-income ratio (DTI) of over 40 percent as a warning sign of unsustainable debt. You can a. use DTI calculator to see where you stand

Consider consolidating or refinancing your student loans

You may be approaching your grace period with several different types of loans with different interest rates, which could make managing your monthly payments difficult. In this case, you can consider refinancing or consolidation after the grace period has expired.

Consolidation is the process of combining multiple federal student loans into one direct consolidation loan that gives you one monthly payment. Refinancing is when you pay off part or all of your loans (both government and private) with a new private loan. The advantage of refinancing is that you may get a cheaper rate on your loans, especially if you started college when interest rates were high. The downside is that you lose the opportunity to take advantage of federal programs like income-oriented repayment plans.

The bottom line

Take some time to study the terms of your student loan grace period and plan for the payments that inevitably come due. A student loan grace period is a great opportunity to generate an income and think about the best way to pay off your student loans.

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