3 smart ways to make the most of your student loan grace period


After you graduate college, you generally have a grace period of six months to one year before you're required to start making payments on your student loans.

Although the grace period gives you time to hunt for a job and get your postcollege financial life in order, it's not exactly a break. Your future self will thank you if you take advantage of your grace period. The majority of millennials with student loans, just over 60%, don't know when or if they'll ever be able to pay off what they owe, but using your grace period wisely can help you understand your situation and even give yourself a head start.

Here are three ways to make the most of your grace period.

1. Get organized

Use this time to get your paperwork in order. Here's how:

Make a spreadsheet. Document details for each loan, including the loan type, balance, interest rate, monthly payment, due date, and loan servicer—that's the company that collects the payments on your loan. Getting to know your loans can help you figure out which repayment strategies you're eligible for, and which will work best for your needs.

Update your contact info. It's crucial that your loan servicer has your up-to-date contact information so that important emails and mailed documents about your loans don't get lost. Sign up for online statements and alerts, too.

Prepare for payments. Once you have a sense of your monthly loan payments, start living as if you have that much less in your monthly budget. That will help you get used to the new expense before repayment kicks in, and give you a few months of savings.

2. Understand your eligibility for repayment plans

Now that you have all the details for your loans, your grace period is a good time to evaluate your overall financial picture and determine the best repayment plan for you.

"If it looks like they're not going to be able to afford their payment, the grace period is a good time to explore the different lower payment options that are available, and try to find the one that best suits not only their budget today, but their long-term financial goals," says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA).

The grace period is a good time to explore the different lower payment options that are available.
Betsy Mayotte
president and founder of The Institute of Student Loan Advisors

Income-driven repayment plans, for instance, limit your monthly payments to a percentage of your income. If you're doing an internship or making a living doing side gigs when your grace period ends, an income-based plan might help bridge the gap until you find full-time employment.

Student loan experts generally recommend sticking with the standard 10-year repayment plan for federal loans, if you can — other options that lower your monthly payment typically extend your repayment timeline, meaning you'll pay more money over time.

3. Pay off interest

Depending on what kind of loans you have, your loans may continue accruing interest during your grace period. If you can afford to, making some payments during your grace period can save you thousands of dollars over the life of your loan.

"Any interest that isn't paid as of the day that the grace period ends is going to be capitalized or added to the principal, which essentially means the borrower is going to be accruing interest off of interest," says Mayotte. "Even if they can't pay all that interest off, paying at least some of it off can definitely save money in the long run."

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