All about the grace period
What exactly does “being in the grace period” mean for your student loans? You aren’t required to make payments. The grace period was designed to give graduating students time to find (and start) work.
Interest might accrue
For most loans, interest will accrue during the grace period. Check the chart below to see if your loans will accrue interest during the grace period.
|Loan Type||Accrues Interest During the Grace Period?|
|Federal subsidized Stafford loans made on or before July 1, 2012||No|
|Federal subsidized Stafford loans made between July 1, 2012 and July 1, 2014||Yes|
|Federal subsidized Stafford loans made on or after July 1, 2014||No|
|Unsubsidized Stafford loans||Yes|
|Graduate and parent PLUS loans||Yes|
|Private, state and institutional loans||In most cases|
If you consolidate – it ends the grace period
Once you consolidate into a Direct Consolidation Loan, the grace period automatically ends.
It affects public service loan forgiveness
Payments made while in the grace period will not count as a qualifying payment towards public service loan forgiveness unless they are consolidated with a Direct Consolidation Loan.
Liz graduated from medical school in May 2018 with $176,000 in federal loans. She is planning to use Public Service Loan Forgiveness (PSLF), and wanted to get a head start. Her residency starts in August 2018, and she would like to start making payments in July. Since she does not have an income right now, she could sign up for PAYE and have $0 payments for 1 year.
Unfortunately, the first 5-6 payments (even $0 payments) she made wouldn’t count as qualifying payments.
Instead, if Liz can consolidate her loans into a Direct Consolidation Loan before her residency starts, she can have a $0 payment and start getting credit for qualifying payments towards PSLF.
It can last for more than 6 months
Depending on your loans, the grace period can last for longer than 6 months. Check the chart below to see how long the grace period normally is for your loans.
|Loan Type||Length of Grace Period|
|Direct Subsidized Loans||6 months|
|Direct Unsubsidized Loans||6 months|
|Subsidized Federal Stafford Loans||6 months|
|Unsubsidized Federal Stafford Loans||6 months|
|Federal Perkins Loan||Varies|
|Active duty military||6 months after you return|
Grace periods can be really useful if you need to wait to pay your federal loans until you have a job. However, with options like income-driven repayment, it is possible to have a $0 payment for a year while you’re looking.
The only times we recommend not utilizing the grace period are when:
- you want to start earning qualified payments towards PSLF and can use a Direct Consolidation Loan
- you can afford to start paying and are not planning on using a forgiveness program