December Graduates: Here’s When You Need to Start Paying Back Your Loans
May and June may be known as graduation season, but this December some graduates will put on their caps and gowns and enter the job market before their other classmates. Amid the bustle of winter celebrations, however, many December grads are left wondering, “when do you have to pay back student loans?”
Student Loan Repayment Grace Period
It can be tempting to start panicking about student loans before you even take off your graduation robe, but the good news is that recent grads are usually not required to start paying back federal student loans right away.
After all, you just graduated and are likely searching for a job where you can put that shiny new degree to work—loan providers understand that you may need a little time to start making payments.
So when do you start paying back your student loans? Many graduates don’t start paying back their student loans until after their “grace period” is over. Your grace period is the chunk of time that your loan provider gives you to get everything in order before you start sending them monthly checks. The standard grace period for federal student loans is six months, but that can vary depending on your personal circumstances.
One important thing to remember is that each federal student loan is generally only eligible for one grace period, which means that if you took out loans during undergrad and used up a grace period after graduation, but then went back to graduate school, the loans you took out for your undergraduate degree likely won’t be eligible for another grace period.
During your grace period (if your loan has one), you won’t be billed by your loan provider, and you have no obligation to start payments. There is, however, still important information you should know about your grace period and when you will have to start making payments.
When Do December Grads Start Repaying Loans?
While the general federal student loan grace period is six months, that can vary depending on the types of loans you have and your personal circumstances. So when do you pay back student loans? Here’s a handy breakdown.
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Stafford Loans (Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford Loans) all have a six-month grace period after graduation, which means that if you graduate in December, your first payment will be due around June.
Federal Perkins Loans generally have a slightly longer nine-month grace period if you are attending school at least half-time. December grads with Perkins Loans can typically expect their first payments due in September of the following year.
The Perkins Loan program ended on September 30, 2017, and final disbursements of Perkins Loans took place by June 30, 2018. If you currently have a Perkins Loan, contact your lender for additional information specific to your repayment terms.
Graduate PLUS loans, which are offered to graduate students, don’t have any grace period at all. They generally require you begin repayment 60 days after the final loan disbursement.
If you are a member of the armed forces in active duty, you may be able to extend your grace period while you’re deployed.
If you have private loans , you may or may not get a grace period, and if you do, it might be a different length than federal student loans offer since private loans are not governed by the same federal guidelines.
Consolidating your loan with the federal government can cut your repayment grace period short. If you consolidate federal loans during your grace period, you will have to start paying your monthly charges shortly after the consolidation is approved.
This means that most December grads who are paying off federal, unconsolidated loans, will need to starting making their student loan payments starting in June.
Taking Advantage of Your Grace Period
One thing to consider is that you can still make loan payments when your loan is in its grace period. Although it may sound tempting to wait as long as possible to start making loan payments, making even small payments during your grace period may help you avoid extra interest and shorten your total repayment period.
Depending on the type of loan you have, you may still be responsible for accrued interest on the loan, even though you aren’t responsible for making payments on your loan during the grace period. At the end of your grace period, the accrued interest is added to your loan principal—if you have unsubsidized loans.
You’ll then be charged interest on that new principal. This means that, if you can afford it, making payments during the grace period can be a help. But even if you’re not making payments during your grace period, it’s a good idea not to ignore your loan altogether.
A student loan grace period gives you time to make a plan for responsibly managing your loan. Using your grace period to make a plan for student loan repayment could help set you up for financial success and could even help you from falling behind on your loans in the future.
One smart thing you could do during your grace period is to research the different loan repayment options available and see which will fit your needs best, whether it’s the standard repayment plan or one based on your expected income.
Most borrowers are automatically put on the Standard Repayment Plan , but some may benefit from choosing one of the alternative payment plans available. The Standard Repayment Plan is based on paying off your loans within 10 years. If you have a high loan balance, that might make your monthly payments steep. In that case, you may want to seek out an income-based repayment option instead.
As a recent grad, it can be easy to assume that you’ll be stuck paying student loans off for decades at the interest rate set by the federal government.
While that may work for some borrowers, it can be worth looking for alternative ways to manage student loan debt. Luckily, there are other options. Refinancing your student loans may net you some potential savings in the form of a hopefully lower interest rate or a shorter payback time.
Refinancing your student loans is a process by which a lender pays off your original loans with a brand new loan that (hopefully) has a better interest rate and loan terms. In the end, you make one monthly payment to your lender until your new refinancing loan is paid off, and say goodbye to federal loan providers once and for all.
Keep in mind that refinancing your federal loans into private loans disqualifies you from federal benefits like deferment, income-based repayment plans, and forbearance—programs that private lenders don’t typically offer.
If you choose to refinance with a private lender like SoFi, however, you could qualify for a lower interest rate. To see what your new loan could look like, take a look at SoFi’s student loan calculator. Plus, when you refinance with SoFi, you don’t automatically lose your grace period, which means you still have that time to set yourself up for student loan success.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.