How to make the most of your student loan grace period

Get ready to start your grace period

When you graduate or leave college, you may enter what’s known as a grace or separation period for your federal and private student loans. Here’s everything you need to know about what this means and how you can make the most of it as you get ready to pay back your student loans.

What is a grace period?

A grace period (sometimes referred to as a separation period) is the time—usually six months—between school and when you’ll need to start making principal and interest payments on your student loans. Lenders give you a grace period so you’ll have time to transition from school to post-college life and prepare for your payments to start.

When your grace period ends, your monthly payments will include principal and interest until your loan is paid off—and these may be higher than any in-school payments you might have made.

• Principal: the amount you borrowed, plus any unpaid interest
• Interest: the amount you’re charged for borrowing the money

What will you pay and when?

If you originally chose to defer making payments while you were in school, you won’t have to make payments during your grace period either. But if you’ve been making in-school payments, you’ll generally continue those during grace. Your servicer will let you know when your first payment will be due—and how much it will be.

Pro tip: Even though you don’t have to make payments during this time, making some—no matter how small—during your grace period may help you save money on your loan in the long run. Here are some tips on how to pay off your student loans faster.

How to prepare for payments during your grace period

• Organize your loan info. Create a spreadsheet of your federal and private student loans—and list the loan servicer for each. Need to figure out who your loan servicers are?
  • For federal student loans, go to the National Student Loan Data System.
  • For private student loans, request a free credit report from annualcreditreport.com. You’ll be able to see which loans have been reported to the consumer reporting agencies.
• Find out how much your payments will be and when they begin. You can get this info from your loan servicer. You can also use online calculators (like this Student Loan Repayment Calculator) to estimate your payments using your loan total and interest rate.
• Sign up for any available discounts, like auto debit, that your servicer offers, so you can save money.
• Be sure to read emails and letters from your loan servicers so you don’t miss out on any important info.
• Create a budget. Making a budget can help you balance your income with regular expenses like rent, food, entertainment, and student loan payments. Use this free budgeting worksheet to kickstart your financial goals.
• Put your job search in high gear. As you’re interviewing with companies, see if they offer a student loan repayment benefit!

Planning is key

Your grace/separation period is all about planning. The more you can do during your grace or separation period to prepare for your monthly payments, the smoother your transition can be. And you’ll be on your way to paying off your student loans in full.