Paying Student Loans Back During Grace Period

Q: Can I start paying back my student loans during the grace period, or do I have to wait until the grace period is over?

A: If you are able to start making your student loans payments immediately after graduation, there is no reason you need to wait for the grace period to end. Although most student loans offer a grace period of 6 months, depending on the type of student loans an individual has, there may be some benefit to paying back the student loans during the grace period.

For example, if an individual has a subsidized student loan, making the payments during the grace period is of some benefit. On a subsidized student loan the government pays the interest during your grace period and any payments you make will be applied directly to the principal balance of your student loan. This lowers the total amount of interest you’ll have to pay over the life of the loan.

If your student loan is unsubsidized, it will continue to accrue interest during your grace period. If you make payments while in the 6 month grace period of the loan you reduce or eliminate capitalized interest, thus reducing the total amount of interest paid over the life of the loan. So if you can start paying back your student loans right away, it would likely be beneficial, as it could save you money in the long run.

Pros and Cons of Paying Back Loan During Grace Period

Paying back student loans during the grace period, which typically begins after graduation and lasts for six to nine months depending on the type of loan, can have both advantages and disadvantages. Here are some pros and cons:


1. Reduced Interest Accrual: Paying off loans during the grace period can help reduce the total amount of interest accrued over the life of the loan, as interest typically begins accruing as soon as the loan is disbursed.

2. Establishing Good Habits: Starting repayment early can help establish good financial habits and discipline, setting a positive tone for managing debt in the future.

3. Lowering Debt Burden: By making payments during the grace period, you can begin chipping away at your overall loan balance sooner, which can lower your debt burden and financial stress over time.

4. Potential for Early Payoff: Making payments during the grace period can put you on track to pay off your loans earlier than if you wait until after the grace period ends, potentially saving you money on interest.


1. Financial Strain: For some recent graduates, especially those who are still seeking employment or have limited income, making loan payments during the grace period can place additional financial strain.

2. Missing Out on Savings: During the grace period, borrowers have the opportunity to save money and build up an emergency fund before loan payments become due. Choosing to make payments during this time may mean sacrificing potential savings.

3. Loss of Flexibility: Opting to start repayment during the grace period may limit your ability to use that time for other financial priorities, such as securing housing, purchasing a car, or furthering your education.

4. Opportunity Cost: The money used to make loan payments during the grace period could potentially be invested elsewhere, potentially earning a higher return than the interest saved by paying off the loans early.

Ultimately, whether paying student loans back during the grace period is advantageous depends on individual financial circumstances, including income, expenses, job prospects, and other financial goals. It’s essential to carefully consider these factors and weigh the pros and cons before making a decision. Additionally, borrowers may want to consult with a financial advisor or student loan counselor for personalized guidance.

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