After the excitement of graduation subsides and new grads settle into their first jobs, student loan payments sneak up quickly in the midst of rent, utilities, insurance and other first-time expenses. Student loan debt can be overwhelming: a 2018 report from The Utility Institute found that up to 40% of student loan borrowers could default on their loans by 2023.

To avoid falling into default and accruing more interest and late fees, careful planning is essential. Certain student loans have a grace period, which allows borrowers to get their ducks in a row before payments begin. Creating a student loan payoff game plan during the grace period, before other expenses are fixed, will help new grads start adulthood in a healthy financial position and ensure they are ready to tackle their student loan debt head-on.

Grace periods vary based on loan type. Popular loans break down as follows:

• Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford Loans have a six-month grace period.

• PLUS Loans, which are normally taken out by parents, don’t have a grace period, but may be eligible for deferment. Borrowers can contact their loan servicer to find out.

Students with Federal Perkins Loans should check with their school to determine if they have a grace period.

• Private loans may offer grace periods, but it varies from lender to lender. Borrowers should check with their lender.

After determining the grace period, grads should take the following steps:

1. Confirm Their FSA ID – Every borrower has a Federal Student Aid (FSA) ID number, which provides access to the U.S. Department of Education’s online services. It’s important that borrowers have their FSA ID ready to go during the repayment process, as it is used for a variety of processes. During the grace period, they should make sure their FSA ID is active, and reset the information if they have forgotten it.

2. Find Their Loan Servicer(s) – The Department of Education assigns each loan to a servicer, who handles billing and other services. You don’t choose your servicer. Grads should establish contact with their servicers during the grace period to ensure the servicers have all their current contact information. It’s important to update loan servicers any time that information changes in the future.

3. Determine Monthly Payments – To help with budgeting, grads should calculate their total monthly payment for all student loans before the grace period ends. If they’re worried they won’t be able to cover the payment, grads should contact a student loan counseling agency for information and resources about repayment options servicers don’t talk about.

4. Create a Budget – Based on monthly student loan payments, rent, savings and other monthly expenses, grads should create a budget that outlines where their money goes. Are they able to throw a little extra money at loan payments each month? Budgeting during the grace period ensures grads are used to it when it comes time to start payments.

5. Start Payments Early – The sooner grads start making payments, the better. If they are able, grads should start making payments right after graduation. Some servicers allow borrowers to pay the monthly interest that accrues before it is added to the loan balance.

While repaying student loans feels like a slow process, disciplined payment, budgeting and taking advantage of the grace period will move new grads toward financial independence more quickly than setting off without a plan.


Mike Sullivan is a personal finance consultant with Take Charge America, a national, non-profit credit counseling, student loan counseling and debt management agency based in Phoenix. More at