Going To School On Loans: Understanding The Grace Period On Each Of Your Student Loans
If you’re going to school, chances are you’re going to be taking out a federal loan to pay that tuition. What you may not understand is how the grace period of that loan works. You may fall under the assumption that your loan will need to be paid back right after graduation. Get schooled on your student loan’s grace period to avoid accidentally defaulting. It’s time to learn what to expect from the different loans that are available.
When you’re getting a federal loan for your college education, you’re actually getting a good deal. Why? Standard bank loans don’t give you a grace period; student loans do give you a grace period. What is a grace period? It’s this period of time where you do not need to make any kind of payment on your loan. On top of that, you don’t have to make any payments on the loan for a certain period of time after you’ve graduated.
Could borrowing money from the federal government get any better? Students going to college face rough and tough times. Imagine adding to the pressure of trying to pay back the loan while they are in school, holding down the job to pay back that loan and keeping their sanity.
What Every Federal Loan Has In Common
The majority of all subsidized and unsubsidized student loans backed by the federal government have a grace period of six months upon graduation. This means students do not need to start paying for them until they have graduated, left school or dropped below half-time status. Of course, PLUS Loans do not fall into this category, as parents will need to start payment right away.
Subsidized Loans – When you have a subsidized loan, it means that any interest you have is paid for by the government (so long as you are going to school). Thus, when you need start paying back your loan, you won’t be held responsible for the interest that was accrued.
Unsubsidized Loans – When you have an unsubsidized loan, you are going to be responsible for any interest that accrues on that federal loan even when you’re in school. You do have a grace period but no matter what… interest will build on that loan.
About Your Grace Period: What You’ll Be Told
When you’re in your grace period, you’ll start getting instructions about the repayment of the loan and when it will first come due. Before you leave school/graduate, make sure you find out how long of a grace period you have.
- Federal Stafford Loan – six-month grace period
- Federal Perkins’ Loan – nine-month grace period
If you’re unsure of your grace period, check the promissory note to see what you agreed to.
What To Do When The Grace Period Isn’t Long Enough
Now, it’s always possible that you’ll fall on hard times… you may be unable to find work or have medical problems. Whatever the reason, you can seek a forbearance or deferment on your federal loan, usually for another six to 12 months before payments become due again.
Before you quit making payments, be sure that the deferment or forbearance was approved. If not, you may end up defaulting on your loan. The last thing you want to do is default. For starters, it can negatively impact your credit rating. On top of that, it can be nearly impossible to get out of the hole and secure any other future educational loans.
If you have a subsidized loan, you will not be charged interest; however, unsubsidized loan will continue to accumulate interest.
Consolidate All Your Student Loans
At the end of your grace period, you may decide that federal loan consolidating is best for you. Consolidation means you lump all the loans into one. Now bear in mind that a consolidated loan will have stipulations. You need to watch out for these stipulations. It’s not always possible to do loan consolidation especially if the loans come from two sources. Loan consolidation will reduce the amount of bills you need to keep track of plus the interest rates are frozen; thus, never fluctuating.
The majority of private student loans will have grace periods that begin with you making an immediate payment to a 12-month grace period. However, when you have a federal loan, you don’t have to worry with paying them off until after graduation.
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