FAQs About Borrow Grace Periods

When taking out a federal or private student loans, lenders know that repayment does not start right away. Although borrowers do not have to make any payments during this grace period, interest does accrue. Although interest rates are low compared to traditional loans, some borrowers choose to pay the interest during this time to prevent compound interest, which adds up to hundreds or thousands of dollars over time.

Q: Do you have to start paying when you are not in school full-time?

A: Usually student loan repayment does not start until a student drops below half-time. Full-time status occurs at twelve credit hours, or four classes a week. Half-time status translates at six credit hours, or two classes per week. Any less than that and lenders consider it time for repayment; however, if a borrower returns to school, the grace period takes effect again.

Q: What if you drop out of school?

A: Once you drop out of school, you still retain the grace period. This may continue for the entire semester, but when that semester ends, the loan company discovers that you are no longer taking courses and repayment starts. The company may postpone repayment but only for a month or two.

Q: Are there any other times your grace period might end?

A: Committing fraud quickly ends any grace period. Many unscrupulous borrowers take out student loans, and then do not enroll in school. This means they obtained a large loan at very reasonable terms. If the lender discovers this fraud, it may force the borrower to make total payment, or even press charges for loan fraud, which is a very serious offense.