College Students

What Should You Do when The Student Loan Grace Period Ends

EPF Last Update: May 22, 2020

You finished college, graduated, but you have one massive burden on your shoulders – student loans.

If you have student loans, then you probably know about the loan grace period too.

The student loan grace period allows you to go for a certain amount of time after graduation without paying the debt.

Don’t get me wrong; the grace period is not a free pass. It is a time to evaluate and improve your financial situation before commencing payment. You need to create a plan to guide you on how to repay your loan once this period ends.

So, if you owe a couple of dollars in student loans, read on for tips to make the repayment of your loans easier.

Find Information Regarding The Student Loan Grace Periods

The loan grace period is a set time after graduation, leaving school, or dropping below half-time enrollment before you have to start repaying your student loan. This is the period that gives you time to get comfortable financially, and to pick the right payment plan for you.

Most federal student loans offer a six-month-long grace period before payments are expected. These include Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans.

However, some federal student loans do not offer a grace period. For instance, repayment of a Federal PLUS loan starts once the loan is fully expended. On the bright side, federal PLUS loans may be eligible for a deferral.

Usually, the six month grace period is fixed. Nonetheless, this period may be subject to change under the following circumstances.

  • Active duties

If you are called to active duty in the force for more than 30 days before the end of your grace period, you will receive the full grace period when you return.

  • Going back to school before your loan’s grace period ends

If you re-enroll in school at least half-time before your grace period ends, you will receive the full six-month grace period when you stop attending a school or drop below half-time enrollment among other conditions.

  • Consolidating your loan

If you consolidate your loans during its grace period, the remainder of your grace period will become invalid. Repayment begins after the Direct Consolidation Loan is paid out. Your first installment will be due roughly two months after the payout.

Know The Total Amount You Owe

Losing track of all of your student loans and total loan balances can be quite easy – mainly when you’re occupied with college. Many students across the country receive multiple minor loans every semester. This could be a combination of federal student loans – such as Stafford, Perkins, and PLUS Loans – and private student loans.

Your school’s financial aid office may be equipped to help you find some basic figures, but there are other efficient ways to find out your exact student loan balance.

For example, You can gain access to all your student loan data through your “My Federal Student Aid” account. You can also find your student loan information by going directly to the National Student Loan Data System (NSLDS).

The NSLDS is the U.S Department of Education’s central database for student aid. It monitors all your federal student loans and stores information so you can quickly check it whenever you need to. It will also tell you which loans are subsidized and which aren’t.

You will need a Federal Student Aid ID, username, and password to log in to both websites.

Information about private student loans is a little more arduous to find. This is because private lenders occasionally sell their loans to other companies. If you don’t know who your private student loan lender is, find out that information from your school’s financial aid office for help, or from your original lender.

All these processes might seem complicated. However, it is necessary to keep track of the student debt you have. This includes knowing how much you borrowed and how much you owe in interests. Once you have a certain amount, to begin with, you can start creating a repayment plan to pay off the debt as soon as possible.

Get in Touch with Student Loan Servicer

Your student loan servicer is the firm or company that oversees your loan from the day the loan is disbursed until the last payout is received. The loan servicer is your first contact point for all loan actions you take. These include: processing your payments, assessing your loan’s interest charges, changing repayment plans, etc.

All debtors should be informed of who their student loan servicer is whenever the management of their account is allocated or switched. However, with the numerous available student loans and servicers, debtors can quickly lose track of this information.

You can find information about your loan servicer by:

  • Logging in to your Federal Student Aid account

The National Student Loan Database System (NSLDS) keeps all the details of every federal student loan you have in one place. Log in to your federal student aid account, and you’ll get access to more information such as account status, debt balance, interest rates, and your student loan servicer for each loan.

  • Reviewing your credit reports

It is always smart to assess all the student loan accounts listed on your credit reports. Unlike the NSLDS, a credit report will contain both federal and private student loans. This makes it an excellent way to check up your loan accounts with private lenders.

Once you’ve tracked them down, you can contact your student loan servicers to review your student loans. Some items your student loan servicer can help with include:

  • Updating your contact information.
  • Assessing your student loan status.
  • Disclosing details on installment amounts and due dates.
  • Dealing with billing questions or errors.
  • Changing your loan repayment plan.

Settle on a Repayment Plan

After graduation, most students have the six month grace period to find the perfect payment plan for their student loans. However, some borrowers blindly settle for whatever program the loan servicer offers, even though it poses a tremendous monetary burden for them.

Federal student loans, particularly, have numerous repayment or forgiveness choices that ease the repayment ordeal. These are:

  • Standard Repayment Plan. This is the default repayment plan that is assigned to you if you don’t choose an alternate plan. The installments are set at a fixed amount, which is usually paid for up to ten years for regular loans and up to 30 years for Consolidation Loans. If you can afford the stated amount, then this is the best approach as you know how much you will pay and for how long.
  • Graduated Repayment Plan. If your estimated income is low at first, but you expect an increase over time, this might be a better option for you. With this plan, your payments will be lower initially and then increase over a period( usually every two years). Just like the standard repayment plan, you will pay the stated amount for up to 10 years or up to 30 years for Consolidation Loans. However, your interest will be higher due to the lower initial payments, and the total amount paid over time will be higher than that of the standard plan.
  • Extended Repayment Plan. If your debt is higher, or your budget won’t accommodate a higher repayment amount, you might want to consider extending the period of your repayment plan. Your payments can be fixed, but the repayment period will be extended to 25 years.
  • You must have more than $30,000 in student loan debt to qualify for this plan(in most cases). Your monthly payments will be lower, but the total amount you repay will be higher because of an extended period.
  • Revised pay as you earn repayment plan (REPAYE). This plan does not apply to Consolidation Loans. Here, your monthly installments are limited to 10 percent of your discretionary income. The payment is recalculated annually based on your existing income and family size.
  • Any unpaid balance is forgiven after 20 or 25 years. However, you might have to pay income taxes on any amounts that are forgiven.
  • Income-Based Repayment Plan (IBR) – This is identical to the REPAYE plan, except that it includes Consolidation Loans.
  • Income-contingent repayment plan (ICR). In this plan, your monthly payment is the lesser amount of 20 percent of the amount you would pay on a repayment plan with a fixed payment over 12 years and is adjusted according to your income. This plan doesn’t apply to consolidated loans.
  • Income-sensitive repayment plan. In this plan, your monthly payment is based on your annual income. However, the formula used to determine the installment quantity can differ among lenders, and the repayment term is up to 15 years.

Keep Your Spending in Check

Changing plans is the toughest feat. You want your sweet vacation in Samoa or Hawaii, but not at the expense of falling behind on your loan payments. So, take a step back and put the rest of your monetary goals to thought – like buying a car, moving to a better house, or planning a wedding. Determine how you’ll combine them with your loan payments.

This, however, does not mean that you should compromise your savings or emergency funding for the sake of your loan. Instead, push back some of them, set up separate savings accounts for them, or find other alternatives to trim your budget or loan payments.

Consolidate Your Loan

If you are managing several loans with different interest rates and repayment terms, you might want to consider refinancing to achieve a better interest rate. Depending on your lender, refinancing can also help you merge and streamline your payments into just one monthly bill.

This might come in handy when choosing your repayment plan.

Beginning the process of paying back your loans can be intimidating. Still, with some thorough planning, financial prioritization, and a payment plan that suits you, you’ll be equipped to put your grace period concerns behind you in no time.

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