Lesser-Known Facts About Student Loan Grace Periods
A federal loan has a grace period, but this differs between the type of loan and the terms of the loan.
Here is a look at things you may not know about a student loan grace period.
The Government Is Looking Out For You
Many federal loans will have a grace period that is six months long. These grace periods are put in place to help borrowers start off on the right foot. They want to give borrowers time to find a job and become financially stable before they start asking for student loan repayments.
Your Grace Period Might Not Be A One Time Deal
A federal student loan will receive one grace period for the loan. The grace period begins when the borrower falls below half time status at school. You will need to understand half time and find out from your school what this means.
Grace periods though don’t have to be a one-time thing. With a Stafford loan for instance if the student returns to a least half-time in 180 days then the grace period will remain intact as if it wasn’t used. When they drop in status again they will receive the full six months grace period.
Different Grace Periods
The grace period you receive will depend on the loan you take. A Stafford loan will have a six-month period and a Perkins loan allows a nine-month period and another six-month period after most periods of deferment. It is important to know what grace period you are given, when it starts and how it works.
The Amount You Owe May Not Rise During the Grace Period
There are loans that will accrue interest whilst in the grace period but there are others that don’t. You should find out which ones do and the ones that don’t, as this will affect the amount that you owe.
If you are incurring interest during the grace period then this will be added to the principal amount that you borrowed. The amount can be lowered by making payments during the grace period and these will mainly go towards the interest.
If your loan does not incur interest during the grace period then it works like an interest free loan. There is no set amount of interest on student loans. The sooner that you pay them then the less interest you will pay in the long run.