A grace period is a period of time in which a person doesn’t need to take an action.

When referring to student loans, a grace period is usually 6 months (though up to 9) in which payments don’t need to be made on a student loan.

To break this down in the simplest of terms:

  1. You borrow money to attend school.
  2. You complete the necessary credits to graduate and do so.
  3. You have 6 (and sometimes up to 9) months to start paying back your student loan.

The period of time that you are neither a student (because you have graduated) and that you are required to start making loan payments is called the grace period.

Grace periods usually occur for three reasons:

  1. You are in the military: if you are in active duty and need to report to the military, you will obtain a grace period.
  2. If you start school again (perhaps by re-enrolling) you are usually eligible for a grace period.
  3. You are consolidating loans: if you have multiple student loans and need to consolidate them, you will usually obtain a grace period to make your first payments.

Grace periods different in length and type, depending on the loan you have. For many federal student loans, there are built in terms for when you need to start making payments. These terms include:

  1. If you take time off from being a student;
  2. Depart school without graduation;
  3. Or don’t take enough active credits to be considered a full time student.

Please note that even during your grace period, your loan might still be accruing interest. So even though you are not actually paying the loan back, the expense that you will need to pay back might be increasing.

A grace period exists to help you make life transitions, start saving money, and getting on firm financial ground to begin loan repayments.