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Student Loans & Six Month Grace Period

Student Loans & Six Month Grace Period

Most student loans have this dandy feature that provides a six month grace period for graduating seniors. As seniors transition into their careers, the delayed payments are designed to help them with that transition as they look for and then secure those positions and fall into a routine of building their lives outside college. Ah…but that six month period seems to fly by, doesn’t it? And, now, the federal government’s six month grace period is set to expire. It’s time to pay the piper.

A new study by the Institute for College Access and Success on its Project Student Debt reveals the average student debt at graduation continues to rise. In 2011, that number showed a 5% increase. Students carried, along with their degrees, an average debt of $26,500 off their student campus. In 2010, that number was $23,350. And if the trend continues, that number will be higher for 2012.

No Jobs

The problem is that fewer college graduates are finding positions in their career choices. In fact, many are having problems securing a job at all. As a result, it makes sense that unpaid credit card debt, student loans and even their car notes are going unpaid or are being paid late. This means more fees being tacked on due to the inability to make on time payments, credit scores are dropping and with more employers looking to credit reports as part of their decision making process, it could be the problems continue to multiply.


So what are the answers? There’s no shortage of great advice, but so many recent grads say that advice is moot. They’re just trying to find a job so that they can have the money to put that advice into play. For those that have found jobs, managing their new lifestyle changes and expenses is crucial. Keeping track of spending and managing a budget can often make all the difference. Nancy Register, director of America Saves offers this advice,

They may find that they will need to cut out unnecessary items in order to pay down their debt or that they can pay a little extra each month to pay down their debt even faster,

It’s crucial to understand the terms of the student loan. Often, college students are so focused on securing financing for their student loans that they don’t always pay as much attention to the small print as they should. And, of course, it’s human nature to avoid the unpleasant aspects of debt, but as soon as a graduate does, the sooner he can get on with the business of paying down his debt.

Register also recommends understanding how interest rates and balances work so that young adults understand the importance of avoiding late fees and why a $1,000 balance could mean they pay much more than that in the long haul. While that sounds like common sense, some polls suggest a large percentage of these young adults have no idea how those dynamics come together.

I’m a nurse. Finances was never part of our course load. I had no idea just how deep I was in with my credit cards and student loans,

said Christy Penson, a recent nursing graduate in Texas. She had several job offers even before she graduated, but she knows too that she chose a field that’s more likely to grow, especially with the new health care laws. Patricia Christel, spokesperson for Sallie Mae agrees, and said,

If you have a credit card, a car loan and a student loan payment, knowing the interest rate and balance size can help you decide how to focus extra funds.

Changing Loan Servicers

It’s also important to stay on top of the changes going on with your loan servicer. Like mortgages, federal and private student loans can be bought and sold numerous times over the course of a loan. While you might think the right information about your specific loan, your address, phone numbers and other information would transition as well, it’s not uncommon for new companies to find they’re missing chunks of information. If you think that might be some lucky break dropped from the heavens, that’s never the case. It just means that you stand a bigger chance of having red marks against your credit scores. It’s up to you to ensure that doesn’t happen.

It’s important to take note of the new payment address or automatic payment instructions, and take any action as directed to ensure an uninterrupted track record of successful payments,”

says Christel.

Finally, consistency is key. If you’re working, if you can adopt the mindset that once you get out from under student loan debt and even credit card debt, the sooner you can begin working towards those big goals in life, including home ownership. Some graduates will defer their student loans, but that’s not recommended unless it’s the only option. Interest accrues on those deferment plans, said Christel.

Ultimately, it comes down to how focused and disciplined we are. If you lack that self discipline, look for ways to improve that since it will follow you throughout your life. If you can easily justify skipping a student loan payment, the more likely you are to allow those habits to affect you for many years and when that happens, you’ll discover huge obstacles that will prevent you from buying that house or gain financing for that new car.

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