David Dulberg
November 2018

If you Graduated Last Spring, Your Grace Period is Over

Six months can seem like a long time. If you’re waiting for your Appenzeller Extra Swiss cheese to age, or your tenth birthday to arrive, or waiting for that check you wrote to be uncashable. But it can also come quickly. Your six months of free Amazon Prime Student, for example, will run out before you know it. Another thing that will end more quickly than you want it: the grace period on your student loans.

Most student loans have a six-month grace period. This gives you a chance to get yourself up and running before repayment begins. Hopefully, you can secure housing and a good enough job to stay up with bills and payments. For those who graduated last spring, the grace period is ending now.

If your loan payments are beginning, you need to be sure your loan servicer, or servicers, know where you are. Missing payments because your servicer can’t locate you will put you in a hole right away. If you don’t know who is servicing your loans, log in or register on the National Student Loan Data System website.

Automatic Enrollment, Wait, What?

Lenders will automatically enroll you in a standard 10-year repayment plan. If this is going to be too much to handle, there are short-term and long-term options available. Some institutions, according to a Government Accountability Office report, actually steer borrowers into forbearance though this isn’t always best for borrowers since interest continues to pile up. This can have negative long-lasting effects. According to the report, colleges may be pushing borrowers in this direction because federal aid money is tied to default rates. Other, possibly better, options for borrowers include income-driven repayment plans in which monthly payments are based on income and family size. According to a recent New York Times article, the repayment plans can drastically reduce monthly payments, “in some case to zero.” These plans have different criteria and can be “confusing”, though, and borrowers may need some assistance.

On the other hand, hopefully you have secured a decent paying job during your grace period. If so, you are ready to enter the standard repayment process. Here are a few questions you might have as you begin paying off your student loans:

How Can I Lower Interest Rates?

Borrowers can lower their interest by a small amount, 0.25 percent, by signing up for automatic deductions. Though not a tremendous amount of money, automatic deductions make repayment more efficient. And every little bit helps, right?

How Can I Avoid Interest on Interest?

Though grace periods provide some relief as you build a life beyond college, interest compounds during this time. If possible, experts suggest paying off this interest before beginning repayment so that you don’t end up paying interest on this interest.

Should I Lower Interest Rates By Refinancing with Private Loans?

Though some private loans may offer initially lower rates, they are often variable and can rise throughout the life of the loan. Additionally, federal loans offer protections unavailable to those with private loans. These include postponement due to hardship or access to income-driven repayment plans. Advocates urge caution before refinancing into the private sector.

Options are available to help

Most people do not realize that there are programs designed to help those who may be struggling with their student loan payments. Thousands of borrowers have trusted Ameritech Financial to be their advocate. Click here to find out what options are available. Our services could help you get back on track.

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David Dulberg

David Dulberg lives with his wife in the coastal hills above a narrow creek, mid-canopy in a redwood forest. He has been writing for non-profits for many years, and volunteers as a pilot on the Baum Squad, a tandem bike riding program for the Earle Baum Center for the Blind. He does not have a pet. This does not make him a bad person.

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