Grace Period

For a borrower with subsidized or unsubsidized Federal Stafford Loans, the grace period begins the day after you leave school . During the grace period, subsidized Stafford Loans are treated just as if the borrower was in school: the federal government pays the interest and the borrower's payments are postponed.

During the grace period for unsubsidized Stafford Loans, the borrower's monthly payments to principal are postponed, but the government does not pay any interest. The borrower is responsible for all interest that accrues during this time.

A Federal SLS borrower does not have a grace period; the repayment period begins as soon as the loan is disbursed. However, if you have been enrolled in school full time, your loan has been in deferment and you have not had to make your monthly principal payments. In this case, once you leave school you must begin making monthly principal and interest payments immediately.

Coordinating Repayment
If you have both Federal SLS and Stafford Loans, you can defer payment on your Federal SLS Loan, for up to six months, while your Stafford Loan is in the grace period. This allows you to begin making payments on both loans at the same time. However, you are responsible for all interest that accrues to your SLS Loan during this period. You must make arrangements with your lender for how interest will be handled. You can either pay the interest during this period or you may request that the lender add your interest to the principal balance of your loan (this is called capitalization). For more information about coordinating repayment, contact your lender.

Grace Period Lengths
The length of your grace period depends on your Stafford Loan's interest rate. All eight percent, nine percent and variable-interest rate loans have six-month grace periods. Most seven percent loans have nine-month grace periods; a few have 10 or 11 months grace. Both the interest rate and grace period length are included on the Loan Disclosure Statement which you received from your lender when you took out your loan.

Re-enrollment
If prior to the end of your grace period you re-enroll at an eligible school on at least a half-time basis, your Federal Stafford Loan will return to its former in-school status and repayment will again be postponed. In this case, the next time you leave school, your grace period will start over again.

If you do not re-enroll, repayment begins on the day after your grace period ends. Re-enrollment after this point will not reverse your repayment status, nor will you be eligible for an additional grace period on your loan.

If you are unsure how much you owe or to whom, consult your promissory note or contact your lender, financial aid officer, or guarantee agency. You will want to find out:

• The amount you owe, your interest rates and who your lenders are.
  
• Whether your loans have been sold.
  
• Whether your loans are being serviced by an agency other than the lender.

Important Terms

Grace Period
The period of time between leaving school and beginning repayment. Subsidized Stafford borrowers do not have to make any principal payments during the grace period and the government pays the interest on the loans. Unsubsidized Stafford borrowers do not have to make principal payments during the grace period, but are responsible for paying all the interest that accrues to the loan. SLS Loans have no grace period. However, borrowers who have both Stafford and SLS Loans can defer payment on their SLS Loan, for up to six months, during their Stafford Loan's grace period.

Leaving School
Graduating, withdrawing or dropping to less than half-time enrollment status as defined by the school.

Full-Time Student
An enrolled student carrying a full-time academic work load as defined by the school.

Capitalization
To add accrued interest to the principal balance of a loan. When you capitalize interest, you do not have to make payments, but when interest is added to the principal balance you pay more in total interest costs. Lenders may capitalize interest no more frequently than quarterly.

Eligible School
A school that is eligible to participate in the Federal Family Education Loan Program.

Half-Time Student
An enrolled student carrying at least half of a full-time academic work load as defined by the school.

Promissory Note
The legal and binding contract you signed which specifies the terms and conditions of your loan.

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Graduation Loan Repayment

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