Student Loan Grace Periods – Know the Facts

One of the most confusing areas in getting a handle on student loans is grace periods. Depending on the type of loan you have, you may or may not have a grace period, and you may or may not accrue interest on the balance of your loan while you use it. Taking advantage of a grace period might end up not being an advantage at all if you don’t know the facts. You can find a current chart about which loans do and don’t have grace periods at CNBC, but be aware that grace periods for private loans depend on which institution originated them.

Additionally whether or not interest accrues to your loan will vary with the type of loan, and the originating institution. The only loans which do not have interest that accrues during the student loan grace period are direct subsidized loans, and direct PLUS loans. In general, interest accrues to private loans during the grace period. Grace periods were intended to allow graduates to find work, and begin building their finances in order to meet their payments. Unfortunately, it’s easy to lose track of time in those six months, as well as how much more you have added to your loan balance in that time.

When you pay back student loans you are not just paying back the amount that you borrowed, you are paying back with interest. A student loan of $50,000 at 4.29 percent repaid over 10 years at $513 per month will see the original balance repaid, in addition to $11,577 in interest. In essence, the faster you pay down your balance the less in interest you will pay over time. For this reason many people consider consolidating their student loans, even though paying those interest charges can net you a significant break on your taxes. So, even if you have no payments due within that grace period, it makes sense and saves money to make those payments if you are able.

Start your student loan grace period by doing these simple things:

• Track down all of your student loans either public or private.

• Contact the loan servicer and start looking at repayment plans or consolidation.

• Find out if there are any loan forgiveness programs specific to your career, or if your employer offers student loan repayment as a benefit.

You should be aware that there are scammers out there preying on new graduates who are overwhelmed by the complexities of their finances and debt. Scammers are always on the lookout for people who are desperate for solution, and will make exorbitant promises to help you obtain forgiveness, forbearance, deferment, or even elimination of your student loan balances. These people are not attorneys, nor are they financial advisors, or any other type of professional. They are criminals. If you feel that you need professional advice on how to handle your student loans, and get a grip on your finances, we do offer free consultationsand will be happy to help you obtain a good result.