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
Perkins loans	No
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
PLUS loans	None
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