08 Jul Grace Periods: Three Tips to Impart to Student Borrowers
By Jessie Barth, Inceptia
The term “Grace Period” may sound soothing to those who are unfamiliar with the concept. Yet for recent grads, students that have dropped to less than half-time enrollment, or those that have left school altogether, these words likely evoke urgent visions of a ticking clock, looming on the horizon. By arming your students with basic knowledge regarding grace periods and student loan debt, you can empower them to work towards a successful (and manageable) repayment plan. Some quick tips to share with your student borrowers:
Know your Loans
First, students need to familiarize themselves on which types of loans they have, so they may determine when their first payment must be sent. We’ve all heard tales of students missing their first payment simply because they aren’t organized, and this mishap is so avoidable! Let your students in on the basics: for federal Stafford loans, the grace period will end six months after graduation or dropping below half-time. For federal Perkins loans, students have nine months to begin repayment. For federal PLUS loans, we advise students to do a bit of detective work and contact their lender, as the details will depend on a few factors. Grace periods for private student loans may also vary, so recommend they consult their paperwork or contact their lender to find out more.
An important note to impart to students: some loans may not even have a grace period (!), and most loans do accrue interest during their grace period. Above all, be sure to encourage students to begin repayment right away once they step foot off campus – if possible.
Know your Limits
Chat with your students about thinking ahead. If they haven’t considered their budget once they’re out of school, it’s time to sit down for a reality check. You can help them calculate their estimated monthly student loan payments with tools like the Federal Student Aid Repayment Estimator (found here). As you both shuffle through their paperwork, have them consider a few pointed questions:
- How much can I set aside every month for repayment?
- Can I pay more than the estimated amount?
- What happens if I’m struggling to meet my repayment obligations?
It’s important for students to plan ahead, and consider all options so they don’t run into any surprises. This conversation may be a helpful eye-opener to many student borrowers that simply haven’t thought this far ahead in terms of their student loan repayment.
Know your Lender(s)
Do they know who their lenders are, and how to contact them? Whether it’s a simple question, or times get tough, it’s vital for students to know how to reach out to their lender. With a simple phone call they may be able work with their loan servicer on a myriad of issues. Lenders can also help them to adjust repayment schedules or offer specific repayment plans so it better adheres to their post-college lifestyle (or income level).
At some point many borrowers may also need to talk about forbearance or deferment, and it makes sense to have these conversations on a timely basis – before they’re in crisis mode or have gone into delinquency. Don’t forget to guide students towards easily accessible resources like NSLDS to help them locate their federal student loan details.
To students, the details can seem complex, but Financial Aid advisors are the soothing balm for the stressed collegiate – you are the teams of people dedicated to helping them build a foundation for a financially secure future. Be sure you harness the bit of time you have during your meetings with students to discuss grace periods, encourage them to study up, and let them ask questions to get organized for the task ahead. Nothing seems as daunting when you’re well prepared.