Student Loan Repayment: Grace Periods What to Know

If you got a loan for school, you should have had some counseling regarding your debt. Student loan debt is probably the least exciting part of graduating from college. If you are a recent graduate, you may hear a whole lot about a 6 month grace period. Let’s explore exactly what a 6 month grace period is, how to prepare for the end of the 6-month grace period, or how your approach to the grace period will affect you in the future.


Grace Periods

“No one told me about this” if that’s what you said when you read the intro paragraph; well you wouldn’t be the first, but you are in the right place! As a borrower, you are responsible for your financial decisions. It’s your responsibility to assure your loan gets paid on-time. If you don’t make payments on your loan in time it will affect your credit and could take a long time for that delinquency to be removed. A grace period is provided by the lender to a borrower. Grace periods are common for any type of loan not just student loan debt and can be common with credit cards too. The lender will allow you a specified period of time in which you are excused from making payments towards the debt. If you’re a recent college graduate, you’ll likely receive a 6 month grace period. The length of the grace period you’ll receive can change based on the types of student loans you have and who your loan provider is.


Unsubsidized Stafford Loans Vs Subsidized Stafford Loans

If you have a  Stafford Loan after Graduation you’ll be granted a 6 month grace period in which you are not required to make payments. If you have a Subsidized Stafford Loan that was originated before July 1, 2014, it will not accrue interest during the grace period. If you have an Unsubsidized Stafford Loan you will be responsible to pay the interest that is accrued while you utilize in-school deferment, grace period, or once the interest is capitalized upon repayment.


Direct PLUS & Parent PLUS Loans

Direct PLUS loans are taken out by graduate students without a cosigner. There is a 6 month grace period after the student is no longer enrolled for atleast half-time. Interest is accrued from the time of disbursement and is capitalized at repayment.


Parent PLUS loans are taken out by parents or guardians, of dependent undergraduate students. Repayment is expected when the loan is disbursed. Interest will begin to accrue from the time of disbursement. There is an optional 6 month grace period once the student is no longer enrolled for atleast half-time.


Federal Perkins Loans

These loans are provided to students that have “exceptional financial need.” After you graduate, withdrawal, or drop under half-time status you have a nine-month grace period. Borrowers with Perkins loans shouldn’t be charged during the initial grace period.


Private Loans

Private loans vary, so if a grace period is permitted it is ultimately up to the lender who provided you with the loan. Typically you should be able to find any information regarding a grace period in your loan agreement. When using a private lender it’s likely that interest will be accrued during the grace period and then ultimately capitalized upon repayment.


What is Capitalized Interest?

Capitalized Interest can seem pretty complex, but it’s fairly simple and REALLY important that you understand what it is. When your loan is disbursed or the funds are sent to your institution, the interest on that loan starts to accrue. Yes, even if you are still in school interest is being accrued on those funds. Upon your repayment that interest will get added onto the principal balance of your loan. Now, capitalized interest will depend on the type of loan that you have. As we discussed above some loans will accrue interest and some will not so be sure to know the types of loans that you have.


So how exactly does capitalized interest work? Let’s say that you went to school for 4 years, borrowed $10,000 a year with a 7% interest rate. So you borrowed a total of $40,000 from your lender.  If you didn’t make payments during school and you had a 6-month grace period (no payments) you would have acquired $1,412 in interest only, after the grace period! If you had a 10-year loan term, the total amount that you’ll have paid on the loan with interest capitalization is $57,700.  That equates to an additional penny for every dollar you borrowed. Try calculating your capitalized interest here


Financial Planning

It should go without saying, but if you can make payments while you’re in school or payments while you’re in your grace period, do it! If you are the last minute type of person and didn’t know about capitalized interests until just now, it’ll be okay. Step one- don’t panic! Here are some ways that you can pay down your debt.


Pay over the minimum payment. Regardless, if you’re on an Income-Based Repayment plan or just making the minimum payment, interest is still being accrued! In order to cut down on the interest being accrued and concentrate more of those payments onto the principle of your loan, you need to pay more. It’s easier said than done, but any additional money that you can put towards the debt will help you to pay less overall. Try making a budget that will allow you to make bi-monthly payments towards the debt. Bi-monthly payments will allow you to pay down the interest sooner so your payments are concentrated on the principle of the loan.


Look to an Employer

A benefit that companies recently have found beneficial is helping employees with student loan debt. Some companies offer resources for graduates like paying contributions toward the debt and offering other financial resources. If you are in the market for new employment, try looking into this as a company benefit. If your employee can contribute to your debt pay down you’ll have the ability to pay it down sooner!



Lucky for you, the gig economy has become rather popular! Try picking up an extra side job, where the profits can all go straight towards your debt. You don’t need a special talent to have a side job. Though a talent helps there are always jobs like babysitting, dog walking, or even housesitting. If you aren’t sure where to start there are a ton of websites that you can use to create a profile and get connected with people locally.


Refinance Student Loans

If you have a high interest rate and a steady income refinancing student loans could be a good option. Refinancing allows you to combine multiple loans into one loan, allows you to select the repayment terms, and can help to cut down on the interest rate. In order to qualify for a student loan refinance you’ll need a steady income and usually a FICO score of 650 or higher. If you can’t qualify on your own, be sure to ask about adding on a cosigner.


Responsible Borrowing

If you’re a recent graduate or in-school currently, don’t try to hide from your debt. Avoiding making payments on your loan will only hurt you and your credit history. Do your research and talk with your lender. The more you can educate yourself as a borrower the better. Just remember, you’re building a strong foundation and you’ll be establishing yourself as a financially responsible borrower.  In a few years, you’ll be thanking yourself for the responsible financial choices that you’ve made!


Student Loan Refinancing or Consolidation?



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Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the web sites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

How to Spot and Steer Clear of Student Loan Consolidation Scams

With around 44 million Americans owing $1.3 trillion in student loan debt, it’s not surprising that many are struggling with repaying their student loans. In fact, around 8 million borrowers went into student loan default in 2016 alone. With so many people feeling overwhelmed by their student loans and desperate to find ways to reduce their debt, it’s not surprising that scammers are taking advantage of the situation.


You’ve likely heard from student loan scammers – either through email, via an online advertisement, or by phone. They often advertise as Obama Student Loan Consolidation or Forgiveness Programs and offer to do things like get rid of your federal student loans, consolidate them for you, and reduce or eliminate your payments.


The government has started to crack down on the scammers – who often take lump sums or monthly fees from desperate borrowers. Many scammers promise things that they can’t deliver like a guaranteed 50% to 70% loan reduction with consolidation. Then they never actually do anything or they take your credit card information and your Social Security number and defraud you even more or steal your identity.


3 Things to Watch Out For

It’s important to know that you don’t need a company to help you consolidate your federal student loans via the Direct Consolidation program – it’s something you can easily do for free. While there are legitimate companies who help you evaluate whether or not student loan consolidation is right for you, and help you do the paperwork – the process is not that complicated and you’re likely better off doing it yourself.


If you do want to have a company help you with the process, there are a few red flags that will help you spot scammers. For example, if a company says that you should stop making payments on your loans and that you should send your student loan payment to them instead of to your student loan servicer, they are likely a scammer.


Companies who contact you via a robocall or who claim to be working with the Department of Education or to be offering services as part of the Obama Student Loan Program are also likely to be scammers. Legitimate companies cannot claim to be working with the Department of Education and do not use robocalls to contact you.


Finally, companies that ask for monthly fees or payment upfront are likely not legitimate. Legitimate companies that help you consolidate your federal student loans will not accept payment until they perform a service – though some will take the money and put it in a holding account until they’re able to help you consolidate your student loans successfully.


What is the Direct Consolidation Loan Program?

The Direct Consolidation program doesn’t wipe out your federal loans or reduce the amount you owe – as some scammers claim. Instead, it combines your loans into one loan which might make it easier to repay depending on your particular circumstances. It doesn’t lower your interest rate, but rather takes all of your federal student loans and puts them together into one loan with a new interest rate that is the weighted average of your previous loans with up to an additional 0.125% tacked on.


Federal Direct Consolidation makes sense for many borrowers as it allows them the ease of repaying just one loan, can allow them to extend the term length on their loans in order to reduce their monthly payments, and is necessary for borrowers to qualify for the Public Service Loan Forgiveness program.


Another benefit of the student loan consolidation is that it allows you to more easily rehabilitate any loans that you have that are in default.


Private Student Loan Consolidation

Consolidating student loans is essentially paying off multiple student loans with one loan. The problem with the Direct Consolidation program is it only allows you to consolidate your federal loans and not your private student loans. Private student loan refinancing allows you to consolidate both federal and private student loans – although if you consolidate federal student loans you lose some of the alternative repayment options and benefits that federal loans offer.


There are many companies currently offering private student loan consolidation and refinance. Many of these companies are start-ups, but there are some like Education Loan Finance which have over three decades of experience in the student loan industry. Education Loan Finance is affiliated with SouthEast Bank and offers student loan consolidation options for borrowers who would like to lower their monthly payments, pay a lower interest rate, and get more flexible terms on their federal and private loans.


All borrowers who are struggling should look into private student loan consolidation as it can save borrowers a significant amount of money as they can reduce their interest rate or greatly reduce their monthly payments by extending the term length of their loans.


By Andy Rombach, LendEDU

Student Loan Facts 2018

For most people in the United States, the cost of going to college represents a huge financial burden. The Federal Student Aid Portfolio Summary, issued by the office of Federal Student Aid and quoting data provided by the National Student Loan Data System (NSLDS), states that as of Q3 2018 approximately 42.2 million people hold outstanding principal and interest balances on federal student loans. These loan types include Direct Loans, Perkins Loans and Federal Family Education Loans (FFEL).


It is important to know the facts about student loans before borrowing. The statistics overwhelmingly point to a growing debt problem. According to the Federal Reserve System, the amount of student loan debt increased by 5.6% in Q3 of 2018, when compared to Q3 of 2017. That may not sound like much until you discover this amount equates to roughly $83,482.32.


The facts do not get any easier to digest for college students in 2018. Whether they attend public or private universities, many students rely on loans for tuition and other expenses. If you are among the more than 42 million borrowers with outstanding student loan debt in the U.S., you might be interested in ways to save, such as through student loan refinancing.


Check Out Our Guide to Student Loan Refinancing


Here are some of the latest statistics to be aware of.

  • According to a report issued by the Federal Reserve System, student loans in the United States currently account for approximately $1.5 trillion in debt.
  • According to the Federal Reserve data, student loan balances increased in 2017 by about $1,490 billion or 5.8%.
  • The data also shows that there are about $84 billion dollars in default.
  • According to Student Debt Relief, there is about $106.5 billion borrowed for student loan debt each year.

A Closer Look at Student Loan Debt


As noted above, debt associated with federal student loans accounted for nearly $1.5 trillion as of Q3 2018. According to the Federal Student Aid Portfolio Summary.


Average Student Loan Debt Borrowed Per Year

Outstanding interest and principal balances for Q3 2018 are as follows:

  • Direct loans – 33.3 million borrowers, representing $1,116 billion
  • FFEL loans – 13.8 million borrowers, accounting for $288.6 billion
  • Perkins loans – 2.4 million borrowers with roughly $7.4 billion owed
  • Stafford subsidized loans – 29.1 million borrowers distributed among $274.2 billion, according to the office of Federal Student Aid Portfolio by Loan Type.
  • Stafford unsubsidized loans – 28 million borrowers, whose loans total $477.8 billion.


Debt management programs get a lot of attention these days. Given the student loan facts, you can see why. It’s important to note that a majority of student loans are in repayment.


The Direct Loan Portfolio by Repayment Plan report issued by the office of Federal Student Aid shows that several million borrowers with direct loans were in the process of repaying their loans as of Q3 2018, including

  • 10 Years Or Less – 11.12 million borrowers with a level repayment plan, owing about $205.1 billion
  • More Than 10 Years – 1.69 million borrowers with a level repayment plan, owing about $76.4 billion
  • Income-Based Repayment (IBR) Plans – about 2.85 million borrowers, owing about $168.5 billion

According to the Direct Loan Portfolio by Delinquency Status report from the office of Federal Student Aid, as of Q3 2018, approximately 3.35 million borrowers had loans in default, with loans totaling about $89.6 billion not yet being repaid. Of that default amount, a little under a million loans are so delinquent as to have been transferred to the Debt Management and Collections System (DMCS). According to this report, about 16.02 million borrowers with direct loans are current on payments, representing an estimated $570.5 billion in debt.


Federal vs. Private Student Loans

According to Student Debt Relief, students borrowed about $125.6 billion in non-federal and federal student loans in the 2010-11 academic year, a number that has fallen to $106.5 billion by the end of the 2016-17 academic year. The drop in money borrowed can possibly be attributed to fewer students attending college. In 2011 16.63 million students enrolled in college, but by 2016 that number had also fallen to 15.74 million in 2016. Fewer students enrolling in college could be the reason for the drop in money borrowed.


Debt vs. Type of School

According to the Federal Student Aid Portfolio Summary, of those who attended a Public institution 24.9 million students borrowed loans and 13.5 million students borrowed loans from a private institution in Q4 of 2018.


Student Loan Debt Trends

Student loans are not limited to undergraduates. An increasing number of individuals pursuing graduate and professional degrees are borrowing for graduate programs on top of what they already owe for undergrad degrees, according to statistics revealed in “The Graduate Student Debt Review,” published in 2014 by the New America Foundation Federal Education Budget Project.


If you combine undergraduate and graduate debt based on degree, the average MBA graduate owes $51,000, a Master of Education grad owes $50,879, a Master of Science grad owes $50,400, a Master of Arts grad owes $58,539, a Law grad owes $140,616, and a Medicine and Health Sciences grad owes $161,772.


The bottom line is, if you are borrowing, then know student loan facts. You can get all the details from lenders or the Federal Student Aid website, an office of the U.S. Department of Education. Finally, review the payment terms and repayment plan options for any student loan you’re considering, including student loan refinancing alternatives, so you can choose a loan that best suits your income bracket, finances, and lifestyle.


Signs It’s Time to Refinance Student Loan Debt


NOTICE: Third Party Web Sites
Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.


Consolidation Vs. Refinancing: Which is Right For You?

Updated November 13, 2019

Anyone who has taken out a student loan has probably been required to sign a promissory note, which confirms a borrower’s responsibility to pay back the money they borrowed to pursue higher education. Many colleges and universities require exit counseling to inform their graduates of the repayment options available through federal loan programs. However, with private financing companies now offering additional options that could possibly lower monthly payments or interest costs over time (also known as student loan refinancing), many financially savvy individuals seek to minimize and simplify their financial debts.


Choosing the right student loan repayment program can be confusing, and borrowers need to be aware that both federal and private lenders offer plans designed to match their budgeting capabilities and financial goals. In today’s financial environment, graduates may want to take advantage of lower interest rates while paying off their debt as soon as possible, or they may prefer to free up extra cash by choosing an extended term with lower payments.  


When is comes to changing your student loan repayment plan, two common terms that often get confused are “consolidation” and “refinancing.” While these two terms are sometimes used interchangeably, they actually represent two different options. This blog outlines the differences between student loan consolidation and student loan refinancing of both private and federal student loans, so you can know which is right for you.


Federal Student Loan Consolidation

Federal or Direct Loan Consolidation allows borrowers to combine multiple federally-funded subsidized or unsubsidized student loans, regardless of income or credit history, into one payment that uses a weighted average of all interest rates rounded up to the nearest 1/8th percent. This form of student loan consolidation is only available for federal loans – student loans acquired by a private lender are not eligible. The benefits of this form of consolidation include the ability to combine loans into one simple payment, the opportunity to switch from various variable rates to one fixed interest rate, and the ability to extend the life of the loan, thereby lowering the total of monthly payments. Borrowers in the federal program are also eligible to take advantage of programs such as deferments, forbearances, or grace periods that temporarily reduce or suspend monthly payments during times of financial hardship. These federal student loan repayment options are typically known as Income-Driven Repayment Plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). The downside is that borrowers can be less likely to save money or see drops in interest rates with these plans. Also, borrowers who extend the life of the loan to lower their monthly payment will likely pay more in interest over the life of the loan.


Private Student Loan Refinancing

Similar to student loan consolidation, refinancing student loans involves combining multiple student loans into one loan with one monthly payment. However, unlike Direct Loan Consolidation, this option is only offered by private lenders and includes the consolidation of both federal and private student loans. Student loan refinancing can reward borrowers who demonstrate responsible financial habits with rates and payment options not offered through the federal consolidation program. New interest rates are calculated based on the borrower’s credit history and overall financial health, as well as current financial market conditions, rather than the weighted average of the included loans. Student loan refinancing can offer the greatest opportunity for a borrower to save money on their student loans since the new rate is applied to every loan that is refinanced. However, it is important to note that when borrowers refinance with a private lender, they may lose the benefits associated with federal student loans, such as income-based repayment, loan forgiveness, deferments, and forbearances. Although not guaranteed, reputable private lenders are interested in the success of their clients and offer support services to help keep their borrowers in good standing during unexpected financial hardship, so be sure to consider the level of customer service available when choosing to refinance your student loans.


Which Is Right For You?

Choosing the financial path that is right for you and your budget is paramount. Compare the terms, interest rates, and benefits of your current student loans to a new potential lender and decide if the potential savings and the stability of your financial situation make the switch worthwhile. Then, figure out what you can comfortably pay each month and how long you intend to make payments on the loan (our loan payment calculator helps borrowers choose a loan term that fits different budgets). Finally, take a look at our application process or give us a call at 1-844-601-ELFI.* Whether you choose to consolidate federal student loans or refinance the combination of private and federal student loans, our team works as your advocate, steering you in the direction that is right for you and your budget.



*Subject to credit approval. Terms and conditions apply.