Updated: May 11, 2023
In the course of borrowing money for college, you may have heard that your loans won't go into repayment until six months after you graduate from college. It's a common belief, but it's not exactly accurate.
Many federal and private student loans provide the option to defer payments while the student is enrolled at least half-time and both provide a grace period before the student needs to begin paying. But that grace period doesn't necessarily start on graduation day. It can begin whenever a student's enrollment drops below half-time, whether due to graduation or taking a semester off.
Why take a semester off?
Students take a semester off for a variety of reasons, including to work full-time. Other reasons to take time off might include a gap year to travel, an illness or injury, or a sick family member. Whatever the reason, it's important to consider the effect taking a semester off will have on your student loans.
What happens to your student loans?
The impact a semester off will have on your student loan is similar for federal and private student loans.
Federal and private student loans typically have a grace period of at least six months where you are not yet required to make payments. The grace period automatically kicks in when a student drops below half-time enrollment, like when you are graduating or taking a semester off.
In general for federal student loans and some private student loans, if you return to school at least half-time before your grace period ends, your grace period may reset as if it were never used. If you re-enroll in school at least half-time after your grace period has ended, your federal or private student loans may return to an in-school deferment status, but your grace period will not reset. That means your loans may go immediately into repayment status after graduation or if you choose to take additional time off. It’s important to check with your student loan servicers to understand the specific policy for your loans.
Also, keep in mind that anytime your student loans enter a repayment status at the end of a grace or deferment period, your accrued interest may capitalize—or be added to your principal balance—which increases the total cost of your loan.
Talk to your servicer or lender
If you drop below half-time enrollment, it’s important to communicate with your servicer or lender to notify them of your enrollment status and when you anticipate returning to school at least half-time.
If your grace period is coming to an end but you need more time, call your servicer or lender right away to ask about your options. You may be eligible to postpone your student loan payments, but this will add to the overall cost of your loan. It's important that you discuss your options sooner rather than later to avoid missing a payment.
