How the grace period works
Federal Direct Subsidized and Unsubsidized loans come with a one-time six-month grace period after you graduate, leave school or drop below half-time. No payments are due during it.
The catch: on unsubsidized loans, interest keeps building during the grace period. On many plans, unpaid interest is added to your balance when repayment starts, and from then on you pay interest on that interest. Private loans set their own rules; some have a grace period, some don't.
What to do, month by month
- Month 1: Find every loan. Log in to studentaid.gov and list each federal loan: balance, rate, type and servicer. Check your credit report for private loans you've forgotten.
- Month 2: Find out who you'll pay. Your servicer is the company that bills you. Create an online account, confirm your address and email, and turn on autopay when it's offered; servicers often give a small rate discount for it.
- Month 3: Pick a repayment plan on purpose. If you don't choose, you're usually placed on the standard plan. Federal repayment options have changed recently, so read the current choices on studentaid.gov before you pick.
- Month 4: Build your first budget around the real payment. Your servicer or studentaid.gov can estimate it. Put it in the rent calculator before you sign a lease.
- Month 5: Consider paying the interest. If you can, paying the interest that built up during grace keeps it from being added to your balance.
- Month 6: Make sure the first payment can't be missed. Autopay on, account funded. A missed first payment is the most avoidable credit-score hit there is.
Rule of thumb: whatever your payment will be, start setting it aside in month one of grace. You'll have five months of payments saved before the first bill, which doubles as an emergency fund.
Should you refinance?
Refinancing federal loans into a private loan can lower your rate, but you give up federal protections like income-driven repayment, forgiveness programs and deferment. It's a one-way door. It can make sense for high-income borrowers with stable jobs and private loans already at high rates; for most new grads with federal loans, it's a decision to make after a year of steady income, not during grace.
Pay them down fast, or invest?
Once payments start, extra money can go either way. Compare both with your actual rate in the loans-vs-invest calculator.
Questions
When do I have to start paying my student loans after graduation?
For federal Direct Subsidized and Unsubsidized loans, after a six-month grace period. Your servicer sends your first bill shortly before payments are due. Private loans set their own terms.
Does interest build during the grace period?
On unsubsidized federal loans, yes, interest accrues during grace. On subsidized loans, the government covers interest during the grace period.
Can I pay during the grace period?
Yes, and there's no penalty. Even paying just the interest that's building keeps your balance from growing before repayment starts.
Do I get a new grace period if I go back to school?
The six-month grace period for a given loan is generally used once. If you've already used it, payments typically start right away when you leave school again. Check with your servicer.