Grace Periods
If a student has used up their 6 month grace period at a prior institution and separates from a different school with a new set of loans do they get a new grace period?
Thanks,
Kellie,
Once grace has been used on a particular loan, a new grace period is not available (of course, brand new loans taken out for the subsequent school will have their own grace period); this is why it is critically important to meet with students one-on-one to go over options. If students have loans for more than one school, it is even more important to introduce them to NSLDS so they can see the status of all their loans and what servicer(s) they need to contact. Loans for one enrollment period may enter repayment at a different time than loans from a later enrollment. Borrowers often do not understand the technicalities of continuous enrollment, and they may not be aware that taking a term/semester off can affect when loans enter grace. We can help students apply for in-school deferments and ensure that all enrollments are reported correctly.
In November, our team attended an FSA default aversion webinar, and a major theme throughout the presentation was enrollment reporting; ensuring that we report drops in a timely manner so that students receive a full grace period.
Going over the student’s NSLDS record will allow them to see the full picture of their obligations, and helping them fill out the in-school deferment will prevent older loans from falling delinquent so they can focus fully on academic or vocation goals.
Kellee Gunderson
That makes sense. What happens to the grace period if the student takes 3 months off and returns to school. Does that leave them with only 3 months left of the grace when they separate again or are they granted a new 6 month grace period?
Kellie,
FSA offers a good website for student questions, studentaid.ed.gov. The Department of Education addresses this issue in the following manner:
“If you reenroll in school at least half-time before the end of your grace period, you will receive the full six-month grace period when you stop attending school or drop below half-time enrollmentâ€.
They also explain how active military duty and loan consolidation may affect the grace period, so the website is a good place to send students.
http://studentaid.ed.gov/repay-loans/understand#can-my-grace-period
Kellee Gunderson
This is one area we always hit hard when speaking with a potential student. We run an NSLDS and go over prior loans. We want to make sure the student understands once they have used the entire 6 months grace period those loans will come due as soon as they are no longer attending our school if they choose to enroll. We also discuss in school deferment at length and options when they graduate. This was a great question.
Lisa,
This really was a great question- after years of speaking to students, we understand how confusing this can be. Students often assume that all loans will be automatically postponed and will be due for payments at the same time. You are providing excellent service by helping them understand their particular loan portfolios and how changes to enrollment will affect their repayment schedules.
On occasion, we have also worked with students who left college and subsequently enrolled in training centers or schools that do not qualify for an in-school deferment. This situation is particularly frustrating for students who assume that any classroom-type interaction should result in the postponement of their loan payments. In addition to the type of initial counseling you have described, we also keep up with former students to ensure that they have all the information necessary to make good student loan decisions.
Kellee Gunderson
This would be something the lenders would have to give an answer to.
