Overview
The weeks and months after graduation—often called “crunch time”—are when loan decisions matter most. Federal borrowers typically have a statutory grace period (commonly six months for Direct Subsidized and Unsubsidized Loans) before required payments begin; private lenders set their own terms. Interest can continue to accrue during that time for many loans, so what you do in this window affects total cost, monthly payment size, and eligibility for federal benefits like Income-Driven Repayment (IDR). (See U.S. Department of Education, Federal Student Aid: https://studentaid.gov.)
Key options to consider
- Make voluntary payments during the grace period
- Why: paying interest (or small principal amounts) now lowers capitalization and total interest. In practice, even modest payments during a 6–9 month grace period can reduce later monthly payments.
- How: contact your servicer, confirm interest accrual, and set up auto-payments for the interest amount.
- Choose or apply for an income-driven repayment (IDR) plan
- Why: IDR plans (REPAYE, PAYE, IBR, and Income-Contingent) base payments on income and family size, potentially making early months manageable and protecting against default. Learn IDR details at Federal Student Aid (https://studentaid.gov).
- Note: enrolling in IDR can change forgiveness timelines and capitalization rules; re-certify income each year.
- Consolidate federal loans (Direct Consolidation)
- Why: consolidation simplifies servicers and payments and can restore access to certain repayment plans or forgiveness paths, but it can also increase interest costs or lose borrower benefits tied to specific loans.
- See pros and cons at: Pros and Cons of Consolidating Federal and Private Student Loans.
- Refinance with a private lender
- Why: refinancing can lower your interest rate if you have strong credit and income, but refinanced loans lose federal benefits (IDR eligibility, deferment, forbearance, and federal forgiveness).
- Tip: if you consider refinancing, compare fixed vs. variable rates and read hardship clauses closely. See our piece on when refinancing into a parent’s name makes sense: When to Refinance Student Loans Into a Parent’s Name.
- Request deferment or forbearance if needed
- Why: temporary relief may prevent missed payments while job-seeking or during medical hardship. Forbearance often allows interest to accrue; subsidized federal loans may have different rules—confirm with your servicer.
- Warning: forbearance can increase long-term cost and delay progress toward forgiveness.
- Protect against errors and servicer issues
- Why: servicer mistakes—misapplied payments, incorrect loan statuses, or lost documentation—can cause delinquency. Review your servicer account, request written confirmations, and keep records of communications.
- See: Transferring Federal Student Loans Between Servicers: What Changes for You.
Practical checklist for the first 90 days after graduation
- Confirm your servicer and loan types at studentaid.gov.
- Note your grace-period end date and whether interest accrues.
- Decide whether to make interest-only or small principal payments now.
- Estimate payments under Standard and IDR plans (use the Payment Estimator at studentaid.gov).
- If you have private loans, call your lender to confirm terms and hardship options (CFPB guidance is useful here).
- Keep an emergency buffer (1–3 months of essential expenses) rather than overextending to pay loans if your job situation is uncertain.
Real-world illustration (example)
A graduate with $30,000 in federal loans and stable employment may find the standard 10-year payment unaffordable; an IDR plan can reduce required payments substantially in the short term and protect credit while income builds. Conversely, a graduate with rising salary expectations and strong credit might refinance private loans to lower interest costs—but only after weighing lost federal protections.
Common mistakes to avoid
- Ignoring the grace period because interest can still accrue.
- Refinancing federal loans without understanding loss of forgiveness and deferment options.
- Missing required annual IDR recertification, which can trigger back payments or removal from the plan.
- Failing to document communications with servicers.
Related FinHelp resources
- How grace periods differ between federal and private loans: How Grace Periods Work Across Federal and Private Student Loans
- How interest capitalization affects total cost: How Interest Capitalization Works in Student Loans
Authoritative sources
- U.S. Department of Education, Federal Student Aid — repayment plans, grace periods, and IDR: https://studentaid.gov
- Institute for College Access & Success (TICAS) — data on borrower counts and total debt (Class of 2023): https://ticas.org
- Consumer Financial Protection Bureau — guidance on private loan repayment and refinancing options: https://consumerfinance.gov
Professional note
In my practice I often see borrowers benefit most by making small interest payments during the grace period and locking in an IDR plan quickly when income is low; this preserves credit and provides breathing room without sacrificing long-term options.
Disclaimer
This article is educational and does not replace personalized financial or legal advice. For help tailored to your situation, contact a qualified financial planner or the Department of Education’s loan servicer.
