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May 17, 2010
Preparing to Repay Your Student Loans
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Loan repayment may seem overwhelming, but it won’t be if you are organized and know what to expect. Let’s talk about preparing to repay your federal student loans.
Promissory Note
When you accepted your federal student loans, you signed a legally binding promissory note for each one. You may have signed individual promissory notes for each loan or a single master promissory note for each loan type.
If you haven’t already done so, look over your promissory notes to re-familiarize yourself with your rights and responsibilities. Each of your promissory notes outlines the terms of your repayment for your federal student loan, so there should be no guesswork involved.
The easiest way to ensure that you have enough money to cover your monthly loan payment is to create a budget. You don’t have to be an accountant or a math wizard to create an easy-to-use budget. If you need help getting started, check out our budget calculator and interactive budget worksheet (pdf, 0.34 MB).
Grace Period
Your student loan's grace period is the amount of time you have before your first payment is due. Your grace period begins once you stop attending school at least half time, and its length depends on the type of loans you have:
- Stafford loans have a 6-month grace period.
- Perkins loans have a 9-month grace period.
- Grad PLUS loans disbursed on or after July 1, 2008, have a 6-month grace period.
- Grad PLUS loans disbursed before July 1, 2008, do not receive a grace period.
- Borrowers of Parent PLUS loans first disbursed on or after July 1, 2008, can request a 6-month grace period.
- Borrowers of Parent PLUS loans first disbursed before July 1, 2008, do not receive a grace period.
- Grace periods vary for private loans. Refer to your loan’s promissory note or contact your lender to find out the details of its grace period.
Each eligible federal student loan receives a single grace period. Once a loan’s grace period ends, it enters repayment. Make sure you don’t accidentally use your grace period by dropping below half-time status without realizing it. Different schools have different definitions of half-time enrollment, so check with your school to find out its guidelines.
If you have a federal student loan and return to full-time student status before your grace period ends, you will retain your full grace period. For example, if you used 4 months of a 6-month grace period, you would still receive the full 6 months the next time you dropped below half-time enrollment. However, if you consolidate your loans, you may lose your grace period on loans that were not in repayment before you consolidated them.
Remember, you are not required to take advantage of your grace period. So if you can afford to begin repaying immediately, do so. The faster you repay, the less your loans cost you in interest.
Loan Repayment
If you are a federal student loan borrower, there are 6 repayment plans available to you. When your loan(s) enter repayment status, they will automatically be set to standard repayment. If you have difficulty making payments under this schedule, you may choose a different repayment plan. While this may reduce your monthly payment amount, it can lengthen your repayment period and you might end up paying more in interest.
