Published in: Student Loans | Dec. 19, 2019

What Happens to Your Student Loans When You Take a Semester Off?

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Planning a break from your studies? Here's how it could impact your debt. 

There are different reasons why students opt to take a break from their studies. For some, it's a matter of burnout. For others, it boils down to finances or family emergencies. And if you happen to fall ill or need time off for medical treatment, you're generally better off deferring your studies than struggling through a semester when you're truly unwell. 

But regardless of why you're planning a hiatus from college, if you intend to take a semester off, you may be wondering how it will impact your student loans. Here's what you need to know. 

A stressed male college student with a stack of books in the library.

Image source: Getty Images

Managing existing loans when you take time off

If you take time out of college, you need to understand how the grace periods work on your loans. Federal loans come with a six-month grace period that kicks in once you're no longer enrolled at least part-time in school. As soon as that grace period ends, you're required to start repaying your student debt. 

If you withdraw from college for too long a period, you could trigger your grace period and subsequent repayment period, and that's bad news if you're not yet done with your studies. But if you're only taking a semester off, that generally won't happen. That's because once you return to school, your grace period will reset, provided you weren't out of school for more than six months. 

Now, with private student loans, things may shake out a little differently. Private loans often have a grace period, and it's often six months long to mimic the grace period of federal loans. Where you have to be careful is that different lenders have different rules for when repayment is triggered. 

Some lenders, for example, will not reset the grace period when you return to college. As such, the time you take off from your studies will count toward your grace period and you'll be required to repay that debt sooner. If you have private loans and are planning to withdraw from school for a semester, it is important to talk to your lender about your options. 

Keep in mind that while you're out of school for your semester off, you may also accrue interest on your loans. But if you took out subsidized federal loans, you don't accrue interest on your student debt during your grace period, which means you should be in the clear. 

Applying for new loans upon your return to school

If you're planning to resume your studies after taking a semester off, chances are, you'll need additional student loans to cover your costs. For federal loans, remember that you're required to reapply for aid every year, regardless of whether you take a semester off. That means you'll need to fill out the FAFSA again and see what aid you're awarded. 

Similarly, if you need to borrow more money privately to finance your education, you can apply to do so at any time. Just make sure you do so a number of months before you plan to re-enroll to give yourself enough time to complete the application process. 

Whether you're taking a semester off from college by choice or due to life circumstances outside of your control, know that doing so could have an impact on your student loans. The good news is that if you're dealing with federal loans, that impact shouldn't be so bad. And if you plead your case with a private lender, you may be able to minimize the impact with them too.

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