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What to Do When Student Loan Grace Period Ends

Dave_BerryDave_Berry 492 replies2600 threadsCC Admissions Expert Senior Member
"STUDENTS WHO RELY ON loans to pay for college may give little thought to the financial burden they've taken on until after graduation. But borrowers will quickly need to devise a plan for how to pay back student loans as their grace period comes to a close and repayment begins.

'They're thinking about graduating and looking for a job, and have kind of put off the idea of what they're going to owe until they leave,' says Chris George, dean of admissions and financial aid at St. Olaf College in Minnesota.

Most students with federal loans will have about six months after graduation before repayment must begin. If a student graduated in the spring, his or her repayment would begin in the fall.

Here are steps that experts advise student loan borrowers take to get started:" ...

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Replies to: What to Do When Student Loan Grace Period Ends

  • kelsmomkelsmom 15624 replies99 threads Senior Member
    I will add a couple things that I think are important:

    If the borrower has older loans (under the FFEL program), there may be more than one servicer. Do not think you have to consolidate loans in this case. You will owe a portion of the payment amount to each servicer, based on the percentage of the total loans owed. It makes sense to consolidate if that will NOT increase the amount owed. Otherwise, stick with the multiple servicer payments to save money in the long run.

    Do exit counseling at student loans.gov. Can’t afford your standard repayment amount? Make sure you request to be enrolled in an income driven repayment plan 45-60 days before your loans go into repayment. Note that checking the box for an alternative repayment plan while doing exit counseling does NOT actually sign you up for the plan. Everyone is automatically placed in the standard 10 year repayment plan. You have to fill out a form for alternative repayment plans (call your servicer to sign up for non-IDR plans such as the graduated plan). If you don’t, your first couple payments may be bigger than you can afford ... because you will be expected to pay the standard ten year payment amount until the IDR request processes. If that happens, and if you can’t afford it, request a forbearance while it processes (and voluntarily pay what you can ... because always paying what you can, when you can results in paying less in the long run).

    If you can’t repay Grad Plus loans immediately upon graduation, when they come due, request a forbearance. Then get yourself into an income driven repayment plan, which will be based on your prior year income.

    Make sure you know whether you have Perkins loans. I can’t stress this enough. I have dealt with too many students who defaulted on their Perkins loans because they didn’t know they had them and/or they didn’t understand what having them actually meant. The Perkins servicer is the school or a company that the school hires to collect the payments. There is a 9 month grace period on Perkins loans, so they don’t come due at the same time as the other federal loans. They are not part of the payment for the other loans. Again, there is a separate servicer for the Perkins loans. If you sign up for an income driven repayment plan, the Perkins loans will NOT be included, even if you check the box saying you want all your loans included in the payment. You have to consolidate Perkins into a direct loan in order for it to be included. This may or may not make sense. If you have a small Perkins loan, consolidation may make it much bigger in the long run. But if you need to consolidate so you can afford repayment, it may be a good option (better than defaulting for nonpayment).

    If you don’t consolidate Perkins into a direct loan, your Perkins loans will not be included in loans eligible for Public Service Loan Forgiveness.

    Exit counseling is your first & most important step (student loans.gov)!
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