When does a student have to start paying back a subsidized loan?
If the loan is a subsidized Stafford loan, repayment begins 6 months
after graduating from college or dropping below half-time enrollment
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If the loan is a Perkins loan, repayment begins 9 months after
graduating from college or dropping below half-time enrollment
The 6 or 9 month delay before repayment begins is called the grace
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. The government continues to pay interest on a subsidized
loan during the grace period. Interest begins accruing on a subsidized
loan the day after the end of the grace period. The first payment will
be due no later than 60 days after the end of the grace period.
Unsubsidized Stafford loans also have a 6-month grace period before
repayment begins, but interest accrues during the grace period just as
it does during the in-school deferment.
If the borrower does not pay the interest as it accrues, the interest
is capitalized (added to the loan balance). This leads to paying
interest on interest. Capitalization typically occurs upon status
changes in a loan, such as the end of the grace period, the end of a
deferment or forbearance and upon default. Capitalization can occur
more frequently on certain types of loans.
If a borrower consolidates a student loan during the grace period,
the borrower will lose the remainder of the grace period. Repayment on
a consolidation loan begins upon disbursement, with a first payment
due no later than 60 days after disbursement.
A leave of absence counts against the grace period. Summer breaks
between the spring and fall semesters do not
count against the grace period, provided that the borrower is enrolled
at least half-time during both periods of enrollment.
There are special rules for members of the military who are called to
active during for a period of more than 30 days during the grace
period. These borrowers are eligible for a military deferment of up to
3 years during their service and are entitled to a full 6-month grace
period after completion of the deferment.