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Smart Ways to Plan Before Your Student Loan Grace Period Ends

Don't let yourself drown in college debt! Take these important steps before your student loan payments begin to put yourself at a financial advantage.

After years of late-night study sessions, research papers, and lectures, you finally did it: You graduated from college. Now you can focus on the next phase of life as you venture into the working world. Depending on the type of student loans you took out to pay for your degree, you likely have a grace period before you need to begin repaying them. This is a valuable benefit that gives you time to get your finances in order before your payments are due. To get the most bang for your buck out of your grace period, here are seven things you should do to prepare for when repayments begin.

1. Find your loans

The majority of students use student loans to cover at least some of their education expenses, and you may have needed to take out several loans throughout your college career. Loans can be transferred and sold, so the first step in managing your debt is finding your loans and learning how long your grace period is. There are two main loan types:

  • Federal student loans: Most borrowers take out federal loans, which usually have six-month grace periods. You’ll contact federal loan servicers to make payments and ask questions; you can find out who your loan servicer is by logging in to your Federal Student Aid account dashboard and scrolling down to the "My Loan Servicers" section.
  • Private student loans: With private student loans, grace period policies vary by lender and repayment plan. Some lenders offer periods as long as nine months, while others don't provide the benefit at all. You can find private student loans by viewing your credit report for free at, with reports available weekly.

Related: How Do Federal and Private Education Loans Differ?

2. Create a budget

Once you know what loans you have and who handles them, you can view your account information and find out when your payments are due and how much you'll owe each month. You should figure out how those payments will fit into your budget. To create a budget, make a list of all your sources of income and all your regular expenses, tracking two categories of expenses:

  • Fixed: These expenses don’t change and include things like rent, car payments, insurance premiums, and student loan payments.
  • Variable: These expenses fluctuate from month to month depending on the economy or your life schedule, including groceries, utility bills, and entertainment-related purchases.

If your expenses are too high for your new income, you may have to look for ways to reduce your costs, like getting another roommate, cutting out certain luxuries, or finding supplementary income through side gigs.

3. Apply for a new repayment plan

If your monthly payments are too high for your budget, you may be able to enroll in a different repayment plan. With federal loans, you may be eligible for an income-driven repayment (IDR) plan that bases your payments on a percentage of your discretionary income. Some borrowers even qualify for payments as low as $0, so they don't have to make any payment at all and aren't considered delinquent. Private loan borrowers have fewer options, but if you can't afford your payments, reach out to your lender to discuss what’s available. Some lenders will allow you to defer your payments so you can get your finances in better shape or work with you to adjust payments.

4. Set up automatic payments

The next step is to sign up for automatic payments. Not only does autopay ensure you’ll never miss a month—doing so incurs late fees and damages your credit—but it also allows you to save money. Federal loan servicers will reduce your interest rate by 0.25% on autopay, and private lenders that offer the benefit provide an interest decrease ranging from 0.25%–0.50%. Over time, this can save you hundreds of dollars! You can sign up for automatic payments online through your account portal or by calling your loan servicer's customer service department.

Related: 5 Benefits of Carrying Student Debt in Your Name

5. Make payments before it ends

Your grace period gives you several months to find a job and get settled before you have to worry about student loan payments. But if you’ve already found a job and are in a comfortable financial position, making payments before they're officially due is a smart idea. With most student loans, interest accrues during the grace period, and it's capitalized (added to the loan principal) once the grace period ends. Making payments during your grace period and even during college cuts down on interest charges and keeps your principal from growing.

For example, let’s say you had $5,000 in federal unsubsidized loans with a 10-year term and a 5.5% interest rate. If you pay $50 per month toward your loans during the grace period, those payments would save you $214.58 in interest charges over the life of your loan, and you'd pay off your loans nine months sooner. You can use a grace period payment calculator to find out how much you can save by making payments that fit into your budget during your grace period. If you have multiple student loans and can only afford to make payments toward one and aren't sure which to choose, target the one with the highest interest rate to save the most money.

6. Ask your employer if they'll help with your loans

If you've found a job and started working, you may be surprised to learn your employer can be a valuable resource for student loan repayment. According to the Society for Human Resource Management, 8% of employers offer student loan repayment benefits to their workers. If you're eligible, your employer may match your monthly payments up to a certain monthly or annual maximum.

7. Consider refinancing high-interest loans

One of the only ways to reduce your payments for some private loans with high interest rates is to refinance your debt. With loan refinancing, you take out a new loan with a lower interest rate or longer repayment term and use it to pay off your existing loans. Borrowers who are employed and have good credit could make their payments a lot more affordable this way. If you qualify for a lower rate, you could also save money over the life of your loan and become debt-free sooner. Before refinancing your loans, get quotes from several lenders to ensure you secure the best possible rates.

Related: 5 Potential Downsides to Refinancing Your Student Loans

Transitioning from college to the real world involves not only finding a job but also strategically managing your finances. Creating a budget and exploring alternative repayment plans for your loans are essential steps to ensuring your financial stability. Take advantage of automatic payments and employer assistance programs to further optimize your repayment journey. These proactive measures will put you on the right path to saving money and reducing your debt in the long run.

While there may not be as many awards as there are for college tuition, there are still some scholarships and grants available to help pay off your student loans. You just have to know where to look!

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