Most federal student loans have a six-month grace period after you finish school or drop below half-time enrollment, during which borrowers don’t have to make payments. The payback terms on private student loans are set by individual lenders, which may or may not offer a grace period.
Keep reading to learn more on student loan repayment, including what the student loan grace period is, when to start paying back federal vs private student loans, what happens if you can’t begin making payments, and more.
Key Points
• Federal student loan payments are typically due six months after graduation or dropping below half-time enrollment.
• Private student loans may have different repayment periods, so it’s important to check with your lender for specific terms and conditions.
• Interest on unsubsidized federal loans and most private loans continues to accrue during the grace period, potentially increasing the total amount you owe.
• Borrowers facing financial hardship can request deferment or forbearance on federal student loans — though interest may continue accruing — while private lenders may offer hardship programs or other extensions.
• Refinancing your student loans can help lower interest rates and monthly payments, making repayment more manageable and potentially saving you money over the long term.
Table of Contents
- What Is the Student Loan Grace Period?
- Federal vs Private Loans: Key Differences
- When to Start Paying Federal Student Loans
- When to Start Paying Private Student Loans
- Can You Get More Time Before Paying Back Student Loans?
- Can You Lower Your Student Loan Payments?
- What Happens if You Don’t Start Paying Back Student Loans?
What Is a Student Loan Grace Period?
A grace period is the time you’re given after graduation before you have to start paying back your student loans. The federal government and many private lenders understand that you might not find a steady job straight out of college.
Both Direct Subsidized and Unsubsidized Loans have a grace period. Direct PLUS loans for graduate students and parents don’t have a grace period. Make sure you understand which loan you have so you’re financially ready to start making payments.
While the grace period gives you time to find a job before you have to start making payments, it’s important to understand that unsubsidized federal student loans will continue to accrue interest during the grace period.
Usually, at the end of the grace period, the interest is capitalized onto the principal (or original amount borrowed). This becomes the new value of the loan, and interest continues to accrue based on this new value.
Recommended: How Much Money to Budget for Student Loans
Federal vs Private Loans: Key Differences
There are two main types of student loans: private student loans and federal student loans. Private student loans are borrowed from a bank, credit union, or online lender. Federal loans are backed by the U.S. Department of Education. Important differences between the two include:
• Only federal student loans have standardized grace periods; many private student loans offer them, but it’s best to check with your lender to be sure.
• Fixed interest rates on federal student loans are generally lower than for private loans.
• Only federal student loans are eligible for income-driven repayment plans, deferment and forbearance, and federal loan forgiveness.
When to Start Paying Federal Student Loans
As noted above, both Direct Subsidized and Unsubsidized Loans offer a six-month grace period where loan payments are not required after a student graduates or drops below half-time enrollment.
• Students who graduated in December 2022 or earlier will make their first payment after October 1, 2023.
• Students who graduated in June 2023 will make their first loan payment in December.
When to Start Paying Private Student Loans
Some private student loans operate with a six-month grace period, similar to federal student loans, but not all. If you have a private student loan, check your loan terms to see if you have a grace period.
If you’re looking to take out a private student loan with a grace period, consider reviewing different lenders to see who has the best terms. Unlike federal student loans, interest rates for private student loans vary based on individual factors including your credit history. Because of this, your interest rate might be higher than it would be with federal loans.
Recommended: A Complete Guide to Private Student Loans
Can You Get More Time Before Paying Back Student Loans?
If you’ve already graduated and you’re having trouble finding a job in your field, you might be stretching your finances as thin as they go. Before you let late payments get the best of you, consider what options are available.
It may be possible to talk to the loan servicer about delaying your payments a little longer. Your lender doesn’t want you to be late either, and might be willing to work with you.
Extended Deferment or Forbearance
Borrowers with federal student loans might qualify for student loan deferment or forbearance, which allow you to temporarily pause payments. Keep in mind that interest may still accrue while your loans are in deferment or forbearance, depending on the type of loan you hold. You’ll be responsible for that interest regardless of when you start making your payments.
The start date of those repayments isn’t the only thing you should be concerned with. If you have student loans, lowering your payment amount is probably on your mind as well. Not sure what your monthly payment is? Use our student loan calculator to estimate your student loan payments.
Can You Lower Your Student Loan Payments?
Depending on the type of loans you have, there are a few different ways you can lower your student loan payments.
Consolidation
If you have many different federal student loans, you might want to consider student loan consolidation. Consolidating your existing loans with a Direct Consolidation Loan means combining all of your federal loans into a single loan and potentially lengthening the term so your payments go down. A longer term, however, means paying more interest over the (now longer) life of your loan.
Your new interest rate will be the weighted average of all your federal loans combined, rounded up to the nearest one-eighth of a percentage, which means consolidation might not lower your interest rate.
With federal student loan consolidation, you still remain eligible for federal benefits and protections.
Refinancing
Refinancing your student loans is taking out a brand new loan to pay off your existing student loan or loans. A refinanced loan uses your credit history to determine your interest rate. Ideally, refinancing will lead to a lower rate. It’s important to note that refinancing student loans forfeits protections that come with federal student loans, like forbearance and income-driven repayment plans.
It’s also possible to lengthen or shorten your loan term. Refinancing can be done with private student loans, federal student loans, or both. Just remember that lengthening the loan term may result in paying more in interest over the life of the loan.
Recommended: A Guide to Refinancing Student Loans
Income-Driven Repayment Plans
If you have federal student loans and have a lower income, you might want to look into Income-Driven Repayment plans. There are a few different IDR options that vary based on your income and family size. And recent changes by the Biden Administration make the plans an even better deal for borrowers.
All IDR plans forgive the remaining balance on your loans either 20 or 25 years after you begin paying the loan back. This could be an option to consider if you are a recent grad. Note that while the remaining balance is forgiven at the end of an IDR loan term, that amount may be considered taxable income by the IRS.
What Happens if You Don’t Start Paying Back Student Loans?
If you don’t start paying back your student loans, you can face some pretty serious financial consequences. Your loan will become delinquent after the first day of missed payments. Once you’re 90 days late making a payment on your federal loans, your loan servicer will report the delinquency to the credit reporting bureaus and your credit score will take a hit.
If you have a private student loan, your lender may report you to the credit reporting bureaus after just 30 days. A lower credit score can make it more difficult to secure credit and loans in the future, and if you do get a loan, it might come with less favorable terms and a higher interest rate.
Student Loan Default
After 270 days, your federal loans will enter default. Private loans may default after 120 days, and Federal Perkins Loans can enter default immediately after you miss a payment.
Once you’re in default, your credit will take another hit. You might also be subject to having your wages garnished (though the rules on this are different when it comes to federal vs. private student loans).
In addition to wage garnishment and damage to your credit, you may also experience the following negative consequences:
• Late fees (typically up to 6% of missed payment amount for federal loans)
• Loss of eligibility for loan deferment or forbearance
• No longer able to choose your repayment plan for federal loans
• The government may withhold your tax refund if you fail to pay federal loans
• Loss of eligibility for financial aid
The Takeaway
The grace period for federal student loans typically lasts six months after graduation or dropping below half-time enrollment, giving you time to prepare for repayment.
If you can’t afford to resume your monthly payments, federal loan holders have options: deferment, an income-driven repayment plan, or refinancing. Some private student loans also offer grace periods; check with your loan servicer to find out.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
How long do you have until you have to start paying back student loans?
You typically have a grace period of six months after graduating or dropping below half-time enrollment before you must start repaying federal student loans. Private loans may have different terms, so check with your lender for specific details.
What is the federal student loan grace period?
Most federal Direct Subsidized and Unsubsidized Loans offer a six-month grace period after you graduate, leave school, or drop below half-time enrollment, during which you’re not required to make payments.
How can I delay payments if I’m not ready to begin repayment?
Federal borrowers can request deferment or forbearance to temporarily pause payments — though interest may continue to accrue depending on your loan type. Private loan options vary by lender and may include hardship programs.
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