Understanding the Term "Grace Period"

If you are a Federal Student Aid (FSA) loan borrower, then you are probably aware of the term “grace period.” The concept of a grace period is simple enough; however, the details of a grace period can be somewhat complicated. First off, a grace period is a set amount of time that you have to complete some task after the original due date ends. In most instances, a grace period measures a period of time in which you owe will not have to pay an existing debt. For FSA loans, the standard grace period is six months. Therefore, after your loan(s) comes due, you will have six months from that date until you actually have to start making payments.

As long as you are enrolled at half-time status or greater, your grace period will not begin. If you can maintain at least half-time status, any of the FSA loans you borrowed will be in “in school” status. As soon as you drop below half-time, your enrollment status will be reported as such, and your grace period will begin. As stated before, your grace period will last for six months. If you resume enrollment at half-time or greater before the six months ends, your loans will go back into “in school” status and your grace period will reset. If you do not resume enrollment, your grace period will expire, and your first loan payment will come due shortly. The only way that this time can expire is if you are not enrolled at least half-time for six consecutive months. If you only use four months of your grace period, it will reset. That time will not accrue; rather, you will always have a fresh six-month grace period until it is completely used up in one consecutive six-month time frame.

Providing a grace period is a helpful tool that loan servicers give to their borrowers; however, please be aware that interest will still accrue on your loans while you are using your grace period. If you have the ability to, it is wise to forego your grace period and start paying your loans as soon as possible. Any added interest takes away from the amount of money you can pay on the principal balance. By all means, if you need six months to get ready to pay off your school loans, use your grace period. It is helpful, but at the same time it allows six more months of interest to accrue on your loans. Use some of your financial literacy skills to determine whether you want to use all, some, or none of your grace period!

By Ryan Laspina
Senior Specialist, Red Flags and External Reviews at APUS