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Student Loan Grace Period Before Entering Repayment

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student-loan-grace-period-before-entering-repaymentBy Shalena Gonzales
Financial Aid Specialist, American Public University

There is some relief in not having to immediately begin repaying most federal student loans once you leave college or drop below half-time enrollment. There is a set period of time after you graduate, leave school, or drop below half time enrollment before you begin repaying Direct Loans. This waiting period before repayment begins is called a “grace period.” This grace period provides you time to get financially established and select your repayment plan.

For Direct Subsidized loans and Direct Unsubsidized loans, the grace period consists of six-months before you are required to begin repayment. During this period, you’ll receive repayment information from your loan servicer and you’ll be notified of your first payment due date. If you receive a Direct Subsidized Loan that is first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance.

There are a few situations that can occur which may change your grace period. These circumstances include the following:

  • Active duty military–If you are called to active military duty for more than 30 days before the end of your grace period, you will receive the full six-month grace period when you return from active duty.
  • Returning to school before the end of your loan’s grace period–If you re-enroll in school at least half-time before the end of your grace period, the grace period will restart, and you will receive the full six-month grace period when you stop attending school or drop below half-time enrollment (other conditions apply).
  • Loan consolidation–If you consolidate your loans during your grace period, you will give up the remainder of your grace period and begin repayment after your Direct Consolidation Loan is disbursed (paid out). Your first bill will be due approximately two months after the Direct Consolidation Loan is disbursed.

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There are additional responsibilities that you must fulfill as a loan borrower when you graduate or attend school less than halftime. These responsibilities include contacting your loan servicer to ensure they have all your correct and up to date contact information as well as completing exit counseling. Exit counseling is a mandatory information session which takes place when you graduate or attend school less than half-time to make sure you understand your rights and responsibilities as a borrower. It also provides you with useful tips and information to help you manage your student loans. You will receive information about repayment and your loan servicer will notify you of the date loan repayment begins (usually six months after you graduate, leave school, or drop below half-time enrollment). Parent PLUS Loan borrowers do not participate in exit counseling.

Exit counseling can be completed at or by filling out and sending back the paper copy that you may receive in the mail from your school. Additional information about grace periods can be found at Understanding Repayment | Federal Student Aid. To get more information regarding exit counseling please go to or you may also view the PDF version of the  Exit Counseling Guide.

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