In the course of borrowing money for college, you may have heard that your loans won't go into repayment until six months after you graduate from college. It's a common belief, but it's not exactly accurate.

Many federal and private student loans provide the option to defer payments while the student is enrolled at least half-time and both provide a grace period before the student needs to begin paying. But that grace period doesn't necessarily start on graduation day. It can begin whenever a student's enrollment drops below half-time, whether due to graduation or taking a semester off.

Why Take a Semester Off?

Students take a semester off for a variety of reasons.

"Many students take an academic term off to work full-time for a short period to earn money to pay for the next phase of their education," said Anita Thomas, senior vice president of Edvisors, a website that provides information and advice on financial aid for students and their parents.

Other reasons might include extreme stress or illness, taking time off to travel or helping care for a sick family member. Whatever the reason, it's important to consider the effect taking a semester off will have on your student loans.

What Happens to Your Student Loans?

The impact a semester off will have on your student loan depends on whether you have federal or private student loans.

Federal Student Loans

Kristen Moon, an independent college counselor and founder of, said federal loans have more flexible terms when it comes to taking a semester off, but you should still consider the ramifications. The grace period for federal student loans automatically kicks in when a student drops below half-time enrollment.

Most grace periods are six months, but Perkins loans have a nine-month grace period.

The way the grace period works with Stafford Loans (i.e., Direct Unsubsidized and Subsidized loans) is more flexible, Moon explained. "If a student returns to at least a half-time status within six months, the grace period on a Stafford Loan resets," she said. "It is as if it were never used."

However, she cautioned that students should be careful not to exceed the grace period for federal student loans

"If a student takes off six months and one day," Moon said, "that grace period is used up and cannot be reset. The next time the student drops below half-time status, the loan will go immediately into repayment status."

Private Student Loans

Private student loans typically have a grace period of 6 or 9 months where you are not yet required to make payments, starting when your enrollment drops below half-time.

When you take a semester off, your loan starts to use its grace period.  Depending on your lender, if you return to school before your grace period ends, your grace period may reset as if it were never used.  Check with your lender to understand their specific policy. Remember, your student loan’s accrued interest may capitalize – or be added to your principal balance – at the end of your grace period, which will increase the total cost of your loan.

You should understand the consequence of using up your entire grace period. When you re-enroll in school at least half time after your grace period has ended, your loan can return to an in-school deferment status, but the grace period will not reset. That means you may go immediately into repayment after graduation or if you choose to take additional time off.

Talk to Your Servicer or Lender

Thomas from Edvisors recommends that students communicate with their servicer or lender, notifying them when they drop below half-time status and when they anticipate returning to school at least half-time.

Borrowers with federal student loans who "are planning to re-enroll need to do so before the grace period expires," Thomas said, "and they will need to communicate with the servicer to confirm their attendance to preserve their grace period for the future."

If your grace period is coming to an end but you need more time, call your servicer or lender right away to ask about your options. You may be eligible to postpone your student loan payments, but keep in mind this will add to the overall cost of your loan. It's important that you discuss your options sooner rather than later to avoid missing a payment.

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