We’re currently in the midst of Spring graduation, which means students from all over the country are prepping for life after college. Searching for a solid career is a top a priority for most.  Meanwhile, if you took out loans to pay for school,  finding the right repayment plan should be coming in as a close second.  Here’s how long you have – along with some options you might want to consider for federal student loans.

Do All Loans Have a Grace Period?

Grace period is the time between your graduation and the first day your student loan payment is due.  Although most federal student loans have a grace period, not all do. Therefore, it’s important to contact your servicer or lender, to find out when you’re expected to make your first payment.

For example, PLUS loans are notoriously known for not having a grace period at all. Which means you’re due to pay once the loan is fully disbursed.

However, most federal student loans come with a six month grace period. Including the loans listed below.

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans

Does Interest Accrue During the Grace Period?

Depending on what kind of loans you have, subsidized or unsubsidized, interest may or may not accrue during the grace period.  With unsubsidized loans for example, you’re responsible to pay interest at all times. In such instances, it’s a good idea to start making payments toward your interest even during the grace period. For subsidized loans, on the other hand, interest won’t accrue. Which ultimately gives borrowers with financial need a chance to get into the job market before it’s time to start making payments.

Which Loans Should I Pay off First?

Most borrowers have a mix of both unsubsidized and subsidized loans. Here’s how to spot the difference: 

  • Unsubsidized loans: For these loans, you don’t have have to demonstrate financial need. Which means, it’s open to students who simply need assistance to cover college tuition. 
  • Subsidized loans: Only students with financial needs may qualify for these loans.  Depending on the financial documents you provide, the lender will decide how much you can borrow, as well as the specific terms you may be offered.

As a borrower, it’s a good idea to come up with a payment strategy to figure out which loans to pay off first. For example, since unsubsidized loans accrue interest after the disbursement date, it’s wise to pay off these first. Then, you can focus on your subsidized loans. To find out which type of loans you may have, exact terms and payment due date – contact your lender or servicer direct.

What are My Repayment Options?

When it comes to either unsubsidized or subsidized federal student loans, The Department of Education offers a variety of repayments plans to fit just about any budget. 

For example, a The Standard Plan typically consist of high monthly payments, but offers borrowers the fastest route to loan payoff. If high payments are a problem, some borrowers may qualify for an Income-Driven Repayment Plan (IDR), which takes your income, family size, and a few other personal factors into account when calculating your monthly payments. An IDR may help you achieve lower payments, but it often doesn’t cover the accrued interest. 

As with any financial decision, there are pros and cons to each option.  If you’re interested in learning more, or if you’d like to know which repayment plans may be available to you, you can visit the DOE direct – or click here for a free consultation with a Docupop enrollment specialist.  If you have private student loans, your exact loan terms and repayments options are set by the lender – which will be your best source for help.

Disclaimer: This site is for informational purposes only, is general in nature, and is not intended to and should not be relied upon to provide financial, legal, or tax advice.

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