With most student loans, you get a grace period before you have to start making your loan repayment. The student loan grace period is usually set for a fixed period of time. It starts from your graduation day or from the day you leave school. So why would you ever want to give up your student loan grace period and start your loan repayment sooner?
Should You Give Up Your Grace Period And Start Repaying Loans Sooner?
Typically, a student loan grace period gives you time to find a job and build your finances up. Most grace periods last between a few months to almost a year, depending on your loan provider. This gives you some breathing space after you graduate and time to figure out how you can start paying off your loans. However, it is always better to start repaying your loan sooner if you can.
Benefits of Foregoing Your Student Loan Grace Period
Although your repayments are scheduled to start only after the grace period, the interest on your loans keeps on accruing from the time you receive the money till the time you pay off your loan completely. In other words, interest is still accruing during your grace period (as well as during the years you spent in school).
Lowers Your Student Loan Interest Rate
When you start repaying your loans sooner, you reduce the accrued interest, which lowers the total cost of your loan substantially over a period of time. The key is to put that early payment towards paying off the principle and towards future payments.
Foregoing your grace period and paying off your student loans earlier can save you thousands of dollars over the term of your loan. Of course, only forgo your grace period if your current financial situation allows you to.