How Long Is My Grace Period on Student Loans?

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Americans have accumulated a total of more than $1.5 trillion in student loan debt, and more than 45 million borrowers worry about how they're going to get those loans paid back. Most student loans don't require you to start making repayments until you're done with school. Yet given how difficult it can be to get a good-paying job right out of college, the challenges of making ends meet while coming up with hundreds or even thousands of dollars for a monthly student loan payment are hard to overcome -- especially given all the other financial challenges young adults face.

The length of your grace period between the time you finish school and when monthly payments on student loans come due gives you a timeframe in which you have to address your financial situation and come up with solutions. Below, we'll look more closely at exactly how long a grace period to expect along with some other considerations you should take into account in repaying your student loans.

The basics of grace periods

Student loans are unusual in that they’re one of the only types of loans that offer an extended grace period. For most personal loans, payments become due immediately once the loan gets made.

However, the idea behind a grace period for student loans makes sense. Many people attend college somewhere other than where they intend to live, so lining up jobs before you graduate can be difficult. By offering a period of time in which a new graduate can get comfortable in their post-school lives, grace periods are invaluable for student borrowers.

There are several nuances to grace periods that can vary across different types of student loans. Certain grace periods also include deferment provisions under which the federal government agrees to pay the interest that accrues on your loan on your behalf. With other types of loans, the grace period doesn't stop interest from accruing, and you'll either have to pay that interest down or have it added to the outstanding balance of your loan.

Grace periods for federal loans

If you know what type of student loan you have, then it's generally pretty easy to figure out how long your grace period will last. In general, the rules differ depending on whether you have federal student loans or private student loans. But even within those types of loans, you'll find some variations in the length of the grace period, whether interest accrues, or even whether a grace period applies at all. Below, we'll go through the various types of federal loans and their grace period provisions.

Direct Subsidized Loans typically have a grace period of six months. These loans have the interest that accrues while you're in school subsidized by the federal government, which means that you don't have to worry about having the interest added to your outstanding loan balance during that period. Direct Subsidized Loans also typically pick up the interest during the grace period, although as the Department of Education notes, certain Direct Subsidized Loans that were issued between mid-2012 and mid-2014 do not include interest during a grace period.  

Direct Unsubsidized Loans also usually have a grace period of six months. However, with Direct Unsubsidized Loans, the federal government doesn't offer any interest subsidy, and so you'll be on the hook for the interest both while you were still in school and during the grace period.

Federal Perkins Loans are typically offered through the school that you attended, and so the provisions that institution offers will determine how your grace period works. Grace periods of nine months are common with Perkins loans, and in some cases, your school will take care of any interest that accrues during the grace period for you. Again, though, it's important to contact your own school to find out what their particular practices are.

Parent PLUS Loans aren't eligible for a grace period, and payments become due immediately. That makes sense from a programmatic standpoint, because unlike the student, parents aren't in any different position to be able to repay loans just because the student has graduated, and so expecting them to start making payments immediately is a lot more reasonable.

Grace periods for private loans

The rules for private student loans vary greatly. Because private student loans aren't as tightly regulated as federal loans, lenders have a lot more leeway to customize their particular loan products to their customers' needs.

However, some basic guidelines for understanding private loan grace periods are available:

• Some private loans don't offer a grace period at all.

• Other private loans have grace periods that can range all the way up to nine months.
• Nearly all private lenders charge interest during the grace period, with some allowing the borrower to add the accrued interest to outstanding principal when the grace period ends.

Data source: U.S. Department of Education; private lender websites.

When does the grace period officially start?

It's critical to look closely at the exact terms of your loan, because there are some situations that can cause your grace period to start even though you weren't aware of it. Two of these situations are quite common.

First, if you drop below halftime status with your studies, then some loans treat that as if you had left school for purposes of deferment periods, thus triggering the start of a grace period. Therefore, if you stay under halftime status for longer than your grace period, you could end up having to make full monthly student loan payments even while you're still in school.

Second, if you decide to take a semester or year off, then it can start the grace period or force you to start making regular payments. If you then return to school, the loan's deferment provisions will often kick back in, but that can still involve extra work along with having to make at least a few months' worth of regular loan payments.

The clock is ticking

A grace period is useful to give you time to get your bearings after you finish school and enter the workforce, but even six to nine months can go by a lot faster than you'd imagine. Be diligent about using any grace period wisely, working to find a job that can help get you into financial position to make full monthly student loan payments once the grace period ends.