Whats Difference Between Grace Period And Deferment

A grace period is a time frame after a loan payment is due when the payment can be made without penalty and without the loan being considered delinquent. Deferment is a period in which a borrower is allowed to postpone loan payments, and interest does not accrue on subsidized loans during deferment.

When facing financial difficulties, borrowers have options to avoid defaulting on their student loans. Understanding the difference between a grace period and deferment can help borrowers make informed decisions. We will explore the distinctions between these two terms and discuss their implications for borrowers.

By the end, you will have a clearer understanding of how grace periods and deferments can provide relief during challenging financial times. Understanding the nuances of these options is crucial for borrowers seeking financial flexibility and stability.

Key Differences

In understanding the differences between grace periods and deferment, it’s essential to grasp the key distinctions in their definitions, eligibility requirements, and implications on loan repayment.


Grace Period: It refers to the period during which borrowers are not required to make payments on their loans, usually just after graduation or leaving school.

Deferment: On the other hand, deferment is a period during which borrowers are granted a temporary suspension of loan payments under specific circumstances, such as economic hardship or returning to school.


Grace Period: Borrowers are typically automatically eligible for a grace period after leaving school or graduating, regardless of their financial situation.

Deferment: To be considered for deferment, borrowers must meet specific criteria, such as economic hardship, unemployment, military service, or enrollment in a qualified educational program.

Grace Period

The grace period is a crucial concept for borrowers, especially for those with student loans. It is a period of time after you graduate, leave school, or drop below half-time enrollment when you are not required to make payments on your student loans. Understanding the specific details of the grace period can help borrowers effectively manage their finances and make informed decisions about their loans.


The grace period typically lasts for six months, but it can vary depending on the type of loan. For example, Federal Stafford loans have a six-month grace period, while Federal Perkins loans have a nine-month grace period.


During the grace period, interest will not accrue on Direct Subsidized loans and other subsidized federal loans. However, for unsubsidized loans, interest will continue to accrue, so it’s important to understand the implications of interest during this period.


Deferment refers to the temporary postponement of a student’s loan payments, and it is an option available for individuals facing financial hardship or going through specific life circumstances, such as attending graduate school, unemployment, or serving in the military.


Deferment generally allows borrowers to suspend their loan payments for a specified period, such as six months to a year, depending on the type of deferment. The duration of deferment can vary based on the borrower’s situation and the specific deferment eligibility criteria.


During deferment, the interest that accrues on certain types of federal student loans may be paid by the government, preventing it from being added to the loan balance. However, for other types of loans, such as unsubsidized federal loans, borrowers are responsible for paying the interest during the deferment period, and if left unpaid, it will capitalize once the deferment ends.

Frequently Asked Questions For Whats Difference Between Grace Period And Deferment

What Is The Difference Between Grace Period And Deferment?

A grace period is time before repayments are due. Deferment allows postponing payments under certain circumstances.

What Is Considered A Grace Period?

A grace period is a specific period of time after a due date during which a payment can be made without penalty.

What Is A Deferment Period?

A deferment period is a time when you can temporarily stop making payments on your loan.


In understanding the difference between grace period and deferment, it’s vital to be aware of their distinct characteristics and purposes. Both options provide essential relief for borrowers facing financial hardships. By examining the specifics of each, individuals can make informed decisions regarding their student loan repayment strategies.

Understanding these distinctions will aid in developing a suitable plan for managing student loan debt.

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