Janice Lozano
For most federal student loans, graduates are given a grace period of six months after graduation before they need to start making loan payments. During this grace period, interest will continue to accrue. For private student loans, the lender or servicer should contact the borrower about their loan payments. Parent PLUS loans are different, as parents can choose to start repayment immediately or defer until their child graduates.
| Characteristics | Values |
|---|---|
| Grace period | Typically six months from the last day of school |
| Interest accrual during grace period | Yes |
| Deferral options | Returning to school or pursuing a graduate degree |
| Loan servicer assistance | Yes, loan servicers can help find a solution |
| Repayment plans | Income-driven repayment plans are available |
| Private loan repayment | Lenders or servicers should contact borrowers about loan payments |
| Parent PLUS loans | Parents can choose to begin repayment immediately or defer until graduation |
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What You'll Learn
Federal loans: six-month grace period after graduation
For federal student loans, you are given a grace period of six months after your graduation before you need to start making payments. This grace period is a time when you are not required to make any payments towards your loan. It starts from your graduation date or the last day of your enrollment if you drop below half-time enrolment. This means that, typically, you will not have to start repaying your federal student loans until around six months after you have graduated or left your course.
During this grace period, interest will continue to accrue on your loan. If you have a subsidized federal loan, the government will pay the interest on your loan until the grace period ends, six months after you graduate. However, if your loan is unsubsidized, interest will accrue from the day you take out the loan, meaning the overall amount you owe will grow during your grace period.
This grace period can be a good opportunity to make a dent in your unsubsidized loans, as any payments you can make during this time will go towards reducing the interest that is accruing. This can save you money in the long run. Alternatively, if you are able to, you could consider making a lump-sum payment towards your subsidized loan before the grace period ends.
It is worth noting that federal loan grace periods do not apply to Parent PLUS loans. These loans start accruing interest from their disbursement date, and parents are required to start making repayments as soon as the loan funds are received. However, parents can request to defer these payments while their child is enrolled in school and for an additional six months after they graduate.
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Private loans: contact your lender for details
The repayment terms for private student loans can vary depending on the lender. While some private lenders may require you to make payments while you are still in school, others may offer a grace period, allowing you to begin repayment after graduation. This grace period could be shorter or longer than the typical six-month federal grace period.
It is crucial to understand the terms and conditions of your private student loans. These terms dictate when you are expected to start making payments and how much you will pay over the life of the loan. Some private lenders offer flexible repayment options, so carefully review your loan agreement or contact your lender for details.
Your loan servicer is a valuable resource for understanding and managing your private student loans. They can provide information about your specific loan terms, repayment options, and potential fees or penalties. Don't hesitate to reach out to your loan servicer with any questions or concerns. Additionally, you can refer to your original loan documents to understand the repayment requirements.
To plan effectively, it is essential to know the repayment timelines for your private student loans. Understanding when your repayment obligations will begin allows you to ensure a smooth transition into the repayment phase after completing your education. Contact your lender to clarify when your repayments will start and whether there is a grace period offered. This information will enable you to make informed financial decisions and manage your finances effectively.
Remember, private student loans often have different repayment terms than federal loans. By contacting your lender and understanding your loan agreement, you can be proactive in managing your private student loan repayments and make informed financial choices.
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Parent PLUS loans: accrue interest from disbursement date
Generally, federal student loan repayment begins six months after graduation. However, Parent PLUS loans are distinct in that they accrue interest from the date of disbursement. This means that interest starts accumulating as soon as the loan funds are released, even while the student is still in school.
Parent PLUS loans are taken out by parents on behalf of their child's education. The unique feature of these loans is that parents have the option to start repayment immediately or defer until their child graduates. This decision allows parents to choose between managing interest accumulation and aligning repayments with their child's graduation.
The interest rate for Parent PLUS loans disbursed between July 1, 2025, and June 30, 2026, is fixed at 8.94% for the loan's duration. There is also a 4.228% fee for loans disbursed on or after October 1, 2020. These rates are subject to change annually on July 1, but once the loan is issued, the rate remains constant.
It is important to note that Parent PLUS loans offer flexibility in repayment. Parents can choose to repay the loan early without penalty, selecting a longer and more affordable repayment plan while making additional payments when possible. This strategy can help reduce the overall interest charged. Additionally, parents can explore the option of adding an endorser, similar to a cosigner for a private student loan, which may improve their chances of approval.
While Parent PLUS loans provide financial support for a student's education, it is essential to understand the implications of interest accrual from the disbursement date. This feature distinguishes Parent PLUS loans from other federal loans, where interest may be subsidized until six months after graduation.
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Income-driven repayment plans: affordable monthly payments
Typically, you have a grace period of six months after graduation before you need to start paying off your student loans. During this time, interest accrues on unsubsidized loans, so it is beneficial to start paying them off as soon as possible.
Income-driven repayment plans can be a helpful option for graduates as they allow for affordable monthly payments based on your income. These plans take into account factors such as income, family size, and the poverty level in your area. Your loan servicer will determine your monthly payment based on your gross income and adjust your payments annually to align with your reported earnings.
For example, the Pay As You Earn (PAYE) repayment plan offered by the U.S. Department of Education caps monthly payments at 15% of your discretionary income. Additionally, any remaining federal student loan debt is forgiven after 20 years of qualifying payments or 10 years under the Public Service Loan Forgiveness Program.
The Income-Based Repayment (IBR) plan is another option to consider, especially if you have FFELP loans or do not qualify for PAYE. Similar to PAYE, you must reapply for IBR annually, and it helps ensure that your payments remain affordable.
You can find out more about these options and how they apply to your specific loans at StudentLoans.gov. It is important to remember that your student loan servicer is available to assist you and work with you to find a suitable repayment solution.
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Deferring payments: possible if returning to school
Deferring student loan payments is a viable option if you're returning to school. This option is available for both federal and private loans, although the specifics may vary depending on the loan provider.
For federal loans, you can generally postpone payments while you're enrolled in school at least half-time. This means that you won't have to make principal and interest payments during this period. However, it's important to note that interest will continue to accrue, increasing your total loan cost.
Private loan providers, such as Sallie Mae, also offer deferment options. With Sallie Mae, you can request a deferment of up to 48 months for undergraduate or graduate student loans as long as you're enrolled at least half-time. Similar to federal loans, interest will continue to accrue during the deferment period.
It's important to stay on top of your payments until your deferment request is approved. Additionally, you can re-request a deferment every 12 months until you reach the maximum allowed months of deferment.
If you're considering returning to school and want to defer your student loan payments, be sure to contact your loan servicer to understand your specific options and the potential impact on your total loan cost.
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Frequently asked questions
For most federal student loans, you will start making payments six months after you graduate, leave school, or drop below half-time enrollment. This is known as the grace period.
During this time, interest will continue to grow. For subsidized loans, the government pays the interest until the grace period ends. For unsubsidized loans, interest accrues from the day you take them out.
Your private student lender or servicer will contact you about your loan payments. This can be done via email or billing statement. They will provide information on when and how to pay your loan.
Your student loan servicer will work with you to find a solution. You can change to an income-driven repayment plan or adjust the plan based on your income. You can also consider deferring your loans if you return to school.
Subsidized loans have interest paid by the government for a certain period, usually until the grace period ends. Unsubsidized loans start accruing interest immediately, and it is recommended to pay them off as soon as possible to minimize the total amount paid.
