Grace period is the six-month interval after a Direct Loan borrower graduates, withdraws, or drops below half-time enrollment before loan repayment begins.
How it works
The institution reports the student’s drop below half-time status to NSLDS. The loan servicer calculates the grace-period end date and sends notices. At the end of six months the first payment becomes due under the chosen or assigned repayment plan. Borrowers who re-enroll at least half-time before the grace period expires receive an in-school deferment and, upon leaving again, a new grace period.
Example: a student finishes an online program on May 15. The six-month grace period runs until approximately November 15. No payment is due until December. Interest on the unsubsidized balance continues to accrue and is capitalized or billed according to the loan terms when repayment starts.
How it differs
Deferment and forbearance are postponements that must be requested or that apply under specific conditions after repayment has begun. An in-school deferment covers periods of at least half-time enrollment. The grace period is a one-time (or renewed) automatic bridge between enrollment and repayment.
Common errors
Assuming payments are optional indefinitely after graduation. Believing interest does not accrue on unsubsidized loans during grace. Expecting a new grace period after a brief return to school that does not reach half-time status.
References
- 1. Federal Student Aid grace periodSix-month period before repayment
- 2. Direct Loan regulationsGrace period rules
Grace period is the six-month interval after a Direct Loan borrower graduates, withdraws, or drops below half-time enrollment before loan repayment begins.