Federal Direct Subsidized Loan are student loans for eligible students to help finance for higher education. It is designed for the low income and amount is determined by the school.
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These days, the student loan has become a usual method to cover the costs of
education. Certainly, students are expected to repay it. Every relief on
repayment is significant. One of them is a grace period. But...
When referring to student loans what is a grace period? The grace period is
definitely good news for you as a student loan borrower. Because that means
that you do not have to start repaying your loans right away. The grace period
can also be seen as a “waiting period” after graduation and before repayment
begins.
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Generally, this is a period of 6 months, but it can be extended up to 3 years if a
borrower is serving on active duty in the Armed Forces.
When the grace period is over, the repayment begins. You can only use the
grace period once per loan, so if you go back to school after your grace period
ends, that loan will not be eligible for a second grace period upon graduation
from the subsequent program. New loans will be eligible for a grace period.
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What should I do during my grace period?
The Grace period represents a significant benefit, and it's tempting to relax and
not care about repaying your loan. But don't do that. Take that time to think
and for creating a strategy for repayment.
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Stafford Loans
After you leave school or drop below half-time enrollment, you have six
months to begin repayment on Stafford loans after graduation. If you have an
older Stafford Loans then you may have a longer grace period.
On subsidized Stafford Direct Loans interest will not accrue while you are in
school and during the grace period. In this case, interest is covered by the
Government.
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On the other hand, this does not case with unsubsidized loans. If you have this
kind of loans, you may either pay the interest during the in-school deferment
and grace periods. Another possibility is that interest will be capitalized when
repayment begins.
In case that interest is accruing during the grace period, you should start with
one hundred early repayments. This will help you to save and avoid
unnecessary interest capitalization. Payment during the grace period is not
mandatory, but if you have the ability to start paying, you should think about
it.
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PLUS Loans
Federal Plus loans do not provide a grace period. Generally, Repayment on
PLUS Loans must begin within sixty days after the final loan disbursement for
the period which the loan was borrowed.
For graduates and professional students, there is a possibility of deferring
repayment within six months after leaving school. When the graduate PLUS
borrower request an in-school deferment, the additional six months will
automatically be applied
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Because PLUS loans are unsubsidized, interest will accrue during the
deferment period.
Consolidating During a Grace Period
If you want, you can consolidate during the grace period. This approach can
lead to a lower interest rate on a direct consolidation loan (this applies only
when consolidated loans with a variable rate).
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Keep in mind when you approach consolidation then you lose all the remaining
time of the grace period. You can also expect to receive your first invoices
within 60 days from the day you receive a new direct consolidation loan.