Student Loan Grace Period

If you are attending school at least half-time, you have a set period of time after you graduate, leave school or drop below half-time status before you must begin repayment on a Stafford or Perkins Loan. This period of time is called a grace period.

You will receive a grace period before your repayment period begins on a Stafford or Perkins Loan. Parents and graduate and professional degree students do not have a grace period on a PLUS Loan. Your grace period will be six or nine months depending on the type of loan.

If you are in active military duty for more than 30 days, the grace period will be delayed (for no more than 3 years) during that time.

When do I start paying back my student loans?
• Federal Perkins Loans—The grace period is nine months. However, if you’re attending less than half-time, check with your financial aid office to determine your grace period. During the grace period, you don’t have to pay any principal, and you won’t be charged interest.
• Direct or FFEL Stafford Loans—The grace period is six months.

• Subsidized loan—During the grace period, you don’t have to pay any principal,* and you won’t be charged interest.
• Unsubsidized loan—You don’t have to pay any principal, but you will be charged interest.

Remember, you can either pay the interest as you go along or it will be capitalized  (i.e., added to the principal loan balance) later.

Your lender will send you information about repayment, and you’ll be notified of the date repayment begins. However, you’re responsible for beginning repayment on time, even if you don’t receive this information. Failing to make payments on your loan can lead to default.* Default* occurs when you fail to meet the terms and conditions of the promissory note,* such as not making timely payments on the loan.

How much time do I have to repay my student loans?

• Federal Perkins Loans—Up to 10 years.

• Direct and FFEL Stafford Loans—Your repayment period varies from 10 to 25 years, depending on which repayment plan you choose. See more on repayment options later in this section.

You’ll get more information about repayment choices before you leave school (exit counseling), and later, during your grace period, from your loan holder.

When do parents and graduate and professional degree students begin repaying a PLUS Loan?
Generally, within 60 days after the loan is fully disbursed (paid out). There is no grace period for these loans. This means interest starts to accrue as soon as the first disbursement is made. Your parents and graduate and professional degree students must begin repaying both principal and interest while in school. However, a graduate and professional degree student PLUS Loan borrower is eligible for an inschool deferment while he or she is enrolled at least half-time.

How much will I have to repay and how often do I make payments?
Direct or FFEL Stafford Loan—Usually, you’ll make monthly payments. Your repayment amount will depend on:
• the size of your debt,
• the length of your repayment period, and
• the repayment plan you choose.

Direct Stafford Loan:
• You’ll make payments to us through our Direct Loan Servicing Center. Direct Loan borrowers can view and pay their bills online using their PIN at: www.dl.ed.gov

FFEL Stafford Loan:
• You’ll repay the private lender that made you the loan.

Federal Perkins Loans:
• You’ll make monthly payments to the school that loaned you the money.
• You’ll have up to 10 years to repay your loan.
• Federal Perkins Loans do not have different repayment plans.

The chart on page 30 shows typical monthly payments and total interest charges for three different 5 percent Perkins Loan amounts over a 10-year period.

Do I have repayment options?
Yes. Repayment plans offered for Direct Stafford Loans are generally the same as those offered for FFEL Stafford Loans. However, the Direct Loan program offers an income contingent repayment plan and the FFEL program offers an income-sensitive repayment plan.

The repayment periods for Stafford Loans vary from 10 to 25 years. When it comes time to repay, you can pick a repayment plan that’s best-suited to your financial situation. The following repayment plans will be available to Direct and FFEL Stafford Loan borrowers who started repaying their loans on or after July 1, 2006:

• A standard plan with a fixed annual repayment amount paid over a fixed period of time not to exceed 10 years.
• A graduated plan paid over a fixed period of time not to exceed 10 years. With this plan, your payments start with a relatively low amount and then increase, generally every two years. For FFEL, the borrower must have more than $30,000 in outstanding FFEL loans.

• An extended plan (for new borrowers on or after October 7, 1998, with more than $30,000 in outstanding Direct Loan debt accumulated on or after that date) with a fixed annual or graduated repayment amount to be paid over a period not to exceed 25 years. For FFEL Loans, the borrower must have more than $30,000 in outstanding loans.

• A plan that bases the monthly payment amount on how much money you make, how much you owe and family size. For Direct Stafford Loans, this plan is called the Income Contingent Repayment Plan (Direct PLUS Loans may not be repaid under the Income-Contingent Repayment Plan). For FFEL Stafford Loans and FFEL PLUS Loans, this plan is called the Income-Sensitive Repayment Plan. The terms under Income Contingent and Income-Sensitive Repayments Plans vary. Visit www.dl.ed.gov for more information for Direct Loan Income Contingent Repayment Plans or your lender for more information on FFEL Income-Sensitive Repayment Plans.

• For Direct Loans, the U.S. Department of Education may offer alternative repayment plans to a borrower who demonstrates that other available repayment plans are not adequate and cannot accommodate the borrower’s exceptional circumstances.

Are there tax incentives while paying back student loans?
Yes. Tax benefits are available for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans used to pay for postsecondary education costs, including PLUS Loans. The Internal Revenue Service (IRS) Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can get more information online at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.