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New Quirk With Fed Loan Servicing- But A Good One?

May 22, 2012 | Adam S. Minsky, Esq. Articles

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Things are all sorts of crazy right now when it comes to the Dept. of Education’s federal loan servicing system. Check out last week’s article for a good summary of the chaos. But now, there might actually be a quirk that is working in favor of student loan borrowers.

First, some background. Let’s talk grace periods. A grace period is the chunk of time after you graduate where no payments are due. It’s a free pass, so to speak, built into student loan repayment that allows you time to find a job and get settled before you have to start paying up. Different loans have different grace periods. Federal Stafford loans, for instance, have a 6-month grace period, while Federal Perkins loans have a 9-month grace period. Even most private student loans have grace periods.

Not all student loans have a grace period, however. Federal Grad PLUS loans, one of the most common and easily-obtainable federal student loans available for students in graduate school, traditionally have had no grace periods. That means that you’re going to get billed the month after you graduate. In an economy that’s still recovering from the Great Recession, this can take recent grads by surprise, and many are unprepared to cough up a hefty payment that quickly.

Well apparently, this may not quite be the case anymore, at least not for everyone. I’ve been getting several reports that for some graduating graduate school students whose loans are serviced by www.MyEdAccount.com, there is now a 6-month grace period for Grad PLUS loans. I don’t know where this came from. What I do know is that it is not universal; that is, some people whose loans are serviced by www.MyEdAccount.com still have no grace period for Grad PLUS loans. I don’t know what is going on with other federal loan servicers.

People, this is a little weird, and I’m skeptical. Regardless of who your federal loan servicer is, if you have Grad PLUS loans and you are graduating, I would just monitor your account closely and regularly verify whether or not a payment is due. While I certainly welcome grace periods for Grad PLUS loans (why on earth is there no grace period for these loans, anyway?), my impression (and my concern) is that this new so-called grace period is the result of the continuing bureaucratic mess at the Dept. of Education, and not the result of a well-intentioned policy change.

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About Adam S. Minsky, Esq.

Adam S. Minsky founded the first law office in Massachusetts devoted entirely to assisting student loan borrowers, and he is one of the only attorneys in the country practicing in this area of law. He provides counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters. He regularly speaks to students, graduates, and advocates about the latest developments in higher education financing.

Books by Adam S. Minsky

The Student Loan Handbook for Law Students and Attorneys

The Student Loan Handbook for Law Students and Attorneys

Student Loan Debt 101

Student Loan Debt 101: The Definitive Guide to Understanding and Managing Your Student Loans

Student Loans for Parents and Cosigners

The Student Loan Guide for Parents and Cosigners

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asminsky@minsky-law.com
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Boston, MA 02110

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