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Prepare for the End of Your Student Loan Grace Period

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Graduating from college is an enormous transition, and between final exams, job searches, graduation parties, and goodbyes, understanding the details of your student loan repayment might get lost in the shuffle.

Prepare for the end of your student loan grace periodEven though you have already sat through your required student loan exit counseling seminar, you may still feel confused and overwhelmed about the fact that your student loans will enter repayment just six short months after graduation (nine months for federal Perkins loans). Here is what you should do during your student loan grace period to make sure you have all your ducks in a row to start paying back your student loans:

1. Get all the necessary information together. Since student loans are borrowed on an annual basis, students will often find they have a variety of individual loans that may even represent several different financial institutions. Before the end of your grace period, make sure you know exactly who owns your loans, what your terms are with each lender, and how much your monthly payments will be.

If you’re not certain how to find all of this information, remember that the financial aid office at your alma mater is not just for prospective and current students. They will be happy to help alumni navigate the new world of student loan repayment, as well. If you are feeling overwhelmed by your looming student loan repayment, a call to your financial aid office will give you an opportunity to talk to an expert.

Once you have all of this information at your fingertips, it will be much easier for you to look into consolidating your federal loans, which can greatly reduce your monthly payment.

2. Get in touch with your lenders. As the borrower, you are ultimately responsible for making your loan payments on time, even if you have not received a bill or notice from your lender. So, it pays to be in touch with your loan servicers to make sure that they have your correct address and to make sure you understand the terms of your loan. Contacting your loan servicer during your grace period will allow you the time to fix any incorrect contact information and clarify any confusion you might have about your loan, before you repayment begins.

3. Learn how to budget. One of the most important skills you will need as an adult is the ability to make and stick to a budget. Having the grace period before repayment is due gives you an opportunity to practice budgeting for a few months before you have to add your student loan on top of your other expenses.

It’s a good idea to get used to deducting your student loan payment amount while your loan is still in the grace period. That will help you to know exactly how far your money goes each month, and it makes it easier to keep spending in check from the beginning.

4. Know your repayment options. 10 years is the standard repayment period for a student loan, but there is a great deal of flexibility in repayment plans. If you know that you will be working in low paying jobs for several years, for example, you can extend the length of your repayment period, thereby reducing your monthly payment. You can also request reduced payments for a few years, and then pay higher amounts later to keep your repayment period at 10 years. There are also alternative methods for repaying student loans, such as working for a government agency or certain non-profits.

The main thing with repayment options is keeping the lines of dialogue open with your lender. As long as you are willing to discuss your options and are making a good faith effort to pay back your debt, you will generally find that your lender is willing to work with you to find a repayment plan you can afford.

The Bottom Line

It may be tempting to think of your grace period as a vacation from worrying about your student loan. But taking the time to plan ahead for your repayment period will make for more relaxed money management once your loans come due.

This is a guest article from Jason Price, of One Money Design, a personal finance blog where you’ll find fresh tips and ideas to improve your money life.


Published or updated August 13, 2012.
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