Grace Period (Student Loans)
EducationGlossary term
Definition
A set period of time after you graduate, leave school, or drop below half-time enrollment during which you are not required to make payments on your federal student loans. For most federal student loans, the grace period is six months, giving you time to find employment and get financially settled. Interest continues to accrue on unsubsidized loans during the grace period, so making payments early can save you money.
Related terms
- Federal Student LoanA loan funded by the federal government to help students pay for college or career school, offering fixed interest rates and flexible repayment options that are generally more favorable than private loans. Federal student loans include Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans, each with different eligibility requirements and terms. Borrowers may also qualify for income-driven repayment plans and loan forgiveness programs.
- DefermentA temporary postponement of student loan payments granted under specific circumstances, such as returning to school, military service, or economic hardship. During deferment, interest does not accrue on subsidized loans, but it does continue to accrue on unsubsidized and PLUS loans. You must apply for deferment through your loan servicer and provide documentation of your qualifying condition.
- Unsubsidized LoanA type of federal student loan available to both undergraduate and graduate students regardless of financial need, where interest begins accruing as soon as the loan is disbursed. Unlike subsidized loans, you are responsible for all interest on unsubsidized loans, including while you are in school. If you do not pay the interest while enrolled, it capitalizes and is added to your principal balance, increasing the total amount you owe.
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