By Jessica Zimmer, Debt.com Financial Fitness Trainer
When you take out student loans, you typically do not have to pay back the loans for a grace period after graduation. The grace period usually ranges between three and twelve months, depending on the type of loan, your lender, and your contract. Usually, a lender only provides one grace period per loan. This is important if you are getting degrees simultaneously or back to back as you take frequent breaks from school.
Now, more people are attending institutions of higher education sporadically. The two degree-phenomenon occurs when graduate students finish their thesis or dissertation at half-time or less, and simultaneously enroll in a second program, such as a M.B.A.
Students get caught when they graduate from one program with plans to enter a second shortly after. They use up their grace period for their loans from the first program. Then they enter the second program. At some point, they take a semester off or choose to enroll less than half-time in the second program. Now they are asked to start paying back their loans from the first program.
Here are some ways to avoid the trap of the grace period.
1. Call the lender and ask for a deferment due to unemployment or an economic hardship. Even if you are entering a new academic program at less than half time, it is likely because you have lost your job or cannot find a new one. The reason you want to go back to school and make payments on your loans later is because you have had trouble keeping a job. Your lender wants to hear that you are working toward a job that will allow you to pay back your loans.
2. If you are going to be enrolled in school even a quarter-time in the near future, sometimes a professor’s signature on a special deferment form can allow you not to make payments on your loans. The signature affirms that you are enrolled and making progress on your degree. Check with your university’s financial aid department about such a form.
3. Avoid entering another academic program shortly after your grace period if you feel that you will have to take off multiple semesters, especially consecutively. Look into online degrees or tests that offer certification. These options will allow you to keep working and making payments on your student loans without having to default or ask for a forbearance.
© March 29, 2011 // Copyright All Material 3/29/11 by Jessica Zimmer