Lana Oconnell
Federal student loans are financed by the American people, and as of 2024, 42.7 million borrowers owe more than $1.6 trillion in student debt. The US Department of Education's Federal Student Aid (FSA) website is the definitive source for current federal student loan balances, including information on whom to pay and when. Generally, for most federal student loans, you will start making payments six months after you graduate, leave school, or drop below half-time enrollment. During the grace period, interest will continue to grow for most loans.
| Characteristics | Values |
|---|---|
| When do you have to start paying federal student loans? | 6 months after you graduate, leave school, or drop below half-time enrollment in school |
| Is there a grace period? | Yes, most federal loans have a grace period of 6 months. Perkins loans have a 9-month grace period. |
| What happens during the grace period? | Interest will continue to grow during this time. |
| What happens if you can't find a job after graduating? | You can benefit from deferring or "pausing" your loan payments if you can't find a job. |
| What if you are a parent taking out a loan for your child? | Parent PLUS loans don’t have a grace period, so repayment must start as soon as the child or school receives the loan funds. However, parents can request to defer making payments while their child is in school and for an additional six months after their child graduates. |
| Where can you find information about your federal student loan balance and repayment? | The U.S. Department of Education’s Federal Student Aid website is the definitive source for current federal student loan balances and repayment information. |
| What if you are in default on your federal student loan? | The U.S. Department of Education will begin collection activities and may authorize involuntary collections on loans under the Federal Family Education Loan Program. |
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What You'll Learn
Federal student loans have a six-month grace period after graduation
However, it's worth mentioning that Parent PLUS loans do not have this grace period. Parents with these loans must start repaying as soon as the loan funds are received by the child or the school. Nonetheless, parents can request a deferment on these loans while their child is in school and for an additional six months after their child's graduation or departure from school.
Perkins loans, which have not been issued since 2017, had a longer nine-month grace period. During the grace period, you should decide on a repayment plan, whether to consolidate your federal student loans, and whether to enrol in autopay.
While federal student loans offer this grace period, it's always an option to start paying them off sooner if you have the financial means and would like to reduce the interest accrued over time.
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Interest accrues during the grace period for most federal loans
Federal student loans typically have a six-month grace period, but this is extended to nine months for Federal Perkins Loans. During this time, you are not required to make any payments. However, for most federal loans, interest will continue to accrue and will be added to the outstanding balance of your loan. This means that making payments during the grace period can help you save money in the long run, as you will avoid interest capitalization.
Interest accrual during the grace period varies depending on the type of loan you have. For Federal Direct Subsidized Loans and Federal Perkins Loans, the government pays the interest when you are enrolled in school at least half-time, during an authorized deferment, and during the grace period. For other federal student loans, such as Direct Unsubsidized Loans and Grad PLUS Loans, you are responsible for paying all of the interest.
If you have the financial means, it is recommended to make payments during the grace period to reduce the amount of interest that will be added to your loan. This can help you better prepare for repayment and save money overall. Additionally, it can help you get a head start on budgeting for your student loan payments.
It is important to note that while the grace period offers temporary relief, it is crucial to use this time wisely. This includes exploring your repayment options, consolidating your federal student loans, and determining your repayment plan. By staying informed and taking proactive steps, you can set yourself up for a successful repayment journey.
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Parent PLUS loans don't have a grace period
For most federal student loans, you start making payments six months after you graduate, leave school, or drop below half-time enrollment. Most federal loans have a grace period during which you don't have to make payments, but interest continues to grow. However, Parent PLUS Loans are unique in that they do not offer a six-month grace period like other student loans. Instead, repayment begins immediately after the child for whom the loan was taken leaves school.
Parents who have taken out PLUS Loans can request to defer making payments while their child is enrolled at least half-time in school and for an additional six months after their child graduates, leaves school, or drops below half-time enrollment. This deferment option allows parents to temporarily pause payments if they are unable to make them when the loan enters repayment. It is important to note that interest will continue to accrue during the deferment period, increasing the overall cost of the loan.
When applying for a Parent PLUS Loan, borrowers are typically given the option to choose between in-school deferment and immediate repayment. Most borrowers opt for in-school deferment, which is usually the default selection if no specific choice is made. However, if parents are able to start repaying the loan while their child is still in school, this can help save on interest costs over time.
To manage Parent PLUS Loan payments effectively, parents can consider various tools and strategies. These may include consolidating the loan, determining an appropriate repayment plan, and enrolling in autopay to simplify the repayment process. Additionally, staying in communication with the loan servicer can provide further guidance on repayment options and temporary relief measures if needed.
In summary, Parent PLUS Loans differ from other federal student loans in that they do not offer a grace period. However, parents have the option to defer payments during the child's enrollment and for a short period after, allowing for some flexibility in managing the financial commitments associated with these loans.
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Perkins loans have a nine-month grace period
Generally, for federal student loans, you will start making payments six months after you graduate, leave school, or drop below half-time enrollment. However, Perkins Loans have a nine-month grace period. This means that you have nine months after you graduate, leave school, or drop below half-time enrollment before you need to start repaying your Perkins Loan.
The nine-month grace period for Perkins Loans is a significant advantage for borrowers. During this time, you are not required to make any payments on your loan. This can be especially beneficial if you need time to secure employment or stabilize your finances before beginning repayment.
It's important to note that the nine-month grace period for Perkins Loans is a one-time benefit. If you return to school or enroll in another educational program after receiving a Perkins Loan, you will still be entitled to the nine-month grace period for that specific loan. However, you will not receive an additional grace period for any subsequent loans.
Additionally, the grace period for Perkins Loans is separate from any deferment requests you may make. If you request a deferment during your initial grace period, you must waive your rights to the remaining grace period in writing. This means that you will need to start making payments on your loan once the deferment period ends, even if the full nine-month grace period has not been utilized.
Finally, it's worth mentioning that no new Perkins Loans have been issued since 2017. However, if you have an existing Perkins Loan, understanding the nine-month grace period can help you effectively plan your repayment strategy.
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Borrowers can consolidate federal loans and choose a repayment plan
If you have multiple federal student loans, you have the option to consolidate them into a Federal Direct Consolidation Loan. This means combining some or all of your federal student loans into one loan with a fixed interest rate. The interest rate on the new loan is calculated as a weighted average of the interest rates of the loans being consolidated and rounded up to the nearest one-eighth of a percent. Consolidating your federal loans can simplify your payments by giving you a single loan with a fixed repayment amount.
Consolidating your federal loans may result in a lower monthly payment, but it could also extend your repayment period, which would increase the total interest paid over the life of the loan. Additionally, if you have made on-time payments and received an interest rate reduction, consolidating your loans may cause you to lose this reduced rate. Consolidating your federal loans may also impact your eligibility for certain repayment programs or plans, such as income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF).
Before consolidating your federal loans, it is important to consider the potential benefits and drawbacks. Consolidation may lower your monthly payments and give you access to certain federal protections and benefits, such as PSLF. However, it can also increase the total cost of your loan and cause you to lose credit for qualifying payments made towards IDR forgiveness or PSLF. Additionally, if you refinance your federal loans with a private lender, you will no longer be eligible for federal loan forgiveness programs and protections, such as deferment, forbearance, and cancellation.
When deciding whether to consolidate your federal loans, it is important to evaluate your financial situation, loan types, interest rates, and repayment goals. You can use the Direct Consolidation Loan Application to see how consolidation will impact your monthly payments and repayment period. It is also recommended to consult with a financial advisor or loan expert to understand the full implications of consolidating your federal student loans.
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Frequently asked questions
You will start making payments on most federal student loans six months after you graduate, leave school, or drop below half-time enrollment.
A grace period is a time after you graduate, leave school, or drop below half-time enrollment when you don't have to make payments. Most federal loans have a grace period, but Parent PLUS loans don't.
You can find out who your loan servicer is by checking your original loan paperwork, such as a promissory note or disbursement notice. If you can't find those papers, you can check your credit report or contact your school's financial aid office.
You can contact your loan servicer to discuss options for delaying or reducing your payments. You may be able to consolidate your loans, change your repayment plan, or enroll in autopay.
