How to Extend a Student Loan Grace Period (And Other Repayment Strategies)
A student loan grace period, which generally lasts six months, gives you time to become financially settled after graduating, leaving school or dropping below full-time status before you start to repay your federal or private student debt.
If you’re still not ready to take on this obligation when the time comes, you might explore a student loan grace period extension, or consider other repayment strategies.
Interest continues to accrue on most federal (and all private) loans during your grace period, but you’re not charged fees for delaying repayment. Depending on both the amount of your loans and the size of your paycheck, adding the loan payments to your financial obligation mix can make a huge impact on your budget.
You should know your options if you’re unable to manage the upcoming payments. It might involve trying for a student loan grace period extension, or exploring other options for repayment. In order to get a handle on what to do, let’s look at the following topics:
How to extend your student loan grace period extension
Typically, the student loan grace period ends six months after a student’s attendance at college drops below half time. For grads, this period begins six months after completing their degree.
However, some grace periods don’t end after six months. In certain situations, you can put off payments longer.
| Type of Loan | Student Loan Grace Period |
|---|---|
| Federal direct subsidized and unsubsidized loans | 6 months |
| Federal direct PLUS loans for graduate students | 6 months |
| Federal direct PLUS loans for parents | 6 months (upon request) |
| Federal Perkins loans | 6 to 9 months (depending on your school) |
| Private or alternative loans | Varies by lender, typically 6 to 9 months |
Generally, if you return to school at least half time before your student loan grace period ends, then your loan clock is reset. You won’t need to make student loan payments while you’re taking classes, and you’ll get a new six-month grace period once you graduate or drop below half-time attendance.
If you’re on active military duty, then you also get a break on repaying education loans. If you’re called to serve for more than 30 days before your grace period has ended, then you’ll get another six-month grace period once you return.
If neither of these situations applies, then you might still have other options. Your best bet may be to enroll in income-driven repayment (IDR) for a monthly payment as low as $0, or request deferment or forbearance on your loans.
As for your private education debt (if you have any), some lenders offer a nine-month student loan grace period. For a grace period extension, check with your lender or loan servicer for options. It’s possible your loans could be eligible for a deferment or forbearance, for example.
Keep in mind, however, that even if you do score a student loan grace period extension, you might not want to do it or simply shouldn’t. No option makes loans disappear. Also, because interest continues to accrue on most loans during deferment, it adds to the balance you’ll ultimately owe.
Other student loan repayment strategies
Whether or not you’re able to extend your student loan grace period, consider these strategies as well.
1. Set up your repayment system
Paying back student loans can be confusing, especially if you have statements flying in from different sources. To make it easier on yourself, devise a system of keeping track of your bills.
One option is using a tool that tracks your student loan data and other financial information, like the My LendingTree dashboard. You can also come up with a system of your own using a spreadsheet.
Once you’ve organized your loans, figure out your best strategy for repaying them. One popular strategy is to make automatic payments from your bank account. Instead of manually paying each bill each month, it’s easier to put the payments on autopilot. Plus, some federal student loan servicers and private lenders may offer a 0.25% interest rate reduction if you opt to use autopay.
2. Think carefully about consolidation
You’ve probably heard about federal loan consolidation. It can be a good strategy, but you should know a few things before opting to consolidate.
Consolidation takes all your federal student loans and combines them together into one new loan. Interest rates are averaged based on the balance of each loan, meaning you’ll ultimately pay the same amount in interest charges, if not more, whether you consolidate or not. However, the interest rate will be fixed instead of having variable rates on different loans.
| Pros | Cons |
|---|---|
| Simplification: You pay only one bill each month instead of many. | If you have loans with different interest rates, your consolidated loan will have a rounded-up average of those rates |
| You may also be able to lower your monthly payments by extending your repayment term, though you're likely to pay more in interest charges over the life of the new loan. | You could reset progress toward programs like Public Service Loan Forgiveness (PSLF) or lose existing benefits on some of your loans |
In either instance, consolidation may cost you. Since you won’t be able to pay off loans with the highest interest rates first, you won’t save any money on interest.
Like consolidation for federal loans, refinancing for federal and/or private student loans would group your loans into one, simpler debt. Unlike consolidation, however, student loan refinancing could lower your interest rate, if you have good credit or a creditworthy cosigner.
Keep in mind: Once you consolidate or refinance, the process can’t be undone. It’s also important to know that if you decide to consolidate or refinance during your student loan grace period, you may yield the rest of that period and begin repayment after your direct consolidation loan is disbursed (though some refinancing companies honor any existing grace periods).
In most cases, your first payment will be due soon after disbursement, which could cut short your grace period. On top of that, refinancing federal loans would turn them private, stripping access to government-exclusive programs like IDR.
3. Take a look at your interest rates
There are three ways to save money while repaying student loans:
- Reducing interest rates
- Increasing payments
- Having loans forgiven
The popular option for reducing interest rates is to refinance with a private lender. Current fixed rates are as low as [slh_product_rates_all product_type=”refinancing” output=”fixed” output_value=”min” /] APR, but you must qualify. Want to learn more? Check out the questions to ask before refinancing student loans.
Increasing payments without refinancing or consolidating can be a great option for paying off your debt faster while saving money. Your best bet is to pay off student loans with the highest interest rates first.
For example, let’s say you have three loans:
- Loan 1: $8,000 balance at 11% interest
- Loan 2: $6,000 balance at 3.5% interest
- Loan 3: $5,000 balance at 6.8% interest
Since you’re charged the most interest every month on Loan 1, you should pay that loan off as soon as possible. To do this, make the minimum payments on Loans 2 and 3 each month, and put everything else toward Loan 1. After Loan 1 is paid off, pay the minimum on Loan 2 and put everything else toward Loan 3.
By following this strategy, you’ll save the most amount of interest possible on each subsequent payment. Just make sure your servicer applies the extra payments toward the principal balance and not to future payments.
Why you shouldn’t skip payments once your grace period ends
One of the worst choices you can make is to skip a payment once your student loan grace period expires. It’s a bad decision for a variety of reasons including:
- You can end up defaulting on your loan, which can mean that your loan becomes a case for collection agencies.
- Charges can be added to your balance — and not small ones, either. For instance, you may incur the cost of placing your loan with a private collection agency.
- You can ruin your credit score. Late payments and loans in default will damage your credit score. This could affect your chances of getting approved for an auto loan or mortgage in the future.
Remember, there are options available most of the time. Listed above are some popular ways to begin paying off your student loans, but don’t forget other options like forbearance and deferment. When in doubt, do your research and call your servicer to see what help is available.