Purpose of the Grace Period of Student Loans

Purpose of the Grace Period of Student Loans
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Purpose of the Grace Period of Student Loans: Education loans are one of the best ways of funding your higher education abroad or in India. However, the bank or lender offers certain facilities along with the education loan so that the students do not face any financial burden during their studies. Graduating from college is a significant milestone, marking the transition from student life to the professional world. 

For many graduates, the concept of a “grace period” or moratorium for education loans provides much-needed financial relief. But what exactly is the purpose of this grace period, and how can it benefit recent graduates? Let’s read and understand.

What is the Purpose of Grace Period in Student Loan?

The major purpose of the grace period in student loans is to provide students sufficient time to start their jobs so that they can be able to start the loan repayment after completing their studies. Usually in India, the banks and NBFCs provide a moratorium period of course period + 1 year or 6 months after getting a job. However, the bank charges simple interest for that period which will eventually accumulate in the net loan amount and EMI will be determined accordingly.

Also Read: Looking for an easy education loan? Check out this blog on YONO SBI Education Loan to Study Abroad

Benefits of Grace Period in Student Loans

One of the primary benefits of the grace period is that it allows graduates to adjust to their new financial responsibilities. After graduation, many students face a situation where they need to secure employment, relocate, and establish a budget. The grace period in education loans provides the necessary time to settle into these new circumstances without the immediate pressure of loan repayments. Check some major benefits and purposes of grace period in student loans below:

  • Finding a job can be a lengthy process. The grace period acts as a buffer which allows graduates to search for employment in their field of study without the stress of immediate loan payments.
  • The grace period also allows graduates to plan their finances more effectively. During this time, they can assess their income, create a budget, and determine how much they can afford to allocate towards their student loan payments.
  • The grace period offers an opportunity to prepare for the repayment process. Students can use this time to set up their payments. For example, there are some banks that offer rebates on interest rates if it is being paid during the moratorium period
  • Hence, if the budget allows the students can plan to pay the interest rate during the moratorium period

The purpose of the Grace Period of Student Loans is to provide students with financial relief during their studies. One should always plan the repayment of the loan properly and try to start repaying the loan as early as possible. Check some FAQs based on the moratorium period below.

Also Read: Want a secured loan? Check here all about Yes Bank Education Loan without Collateral

FAQs on the Purpose of the Grace Period of Student Loans

What is a grace period in the context of student loans?

A grace period, also known as a moratorium period, is a period after a student graduates during which they are not required to start repaying their education loan. This period gives the student sufficient time to find employment and stabilise their financial situation before beginning loan repayments.

How long is the typical Grace Period for Student Loans in India?

In India, the Grace Period of Student Loans offered by banks and non-banking financial companies (NBFCs) is usually the duration of the course plus one year, or six months after getting a job, whichever is earlier.

What are the benefits of having a Grace Period for Student Loans?

Some of the major benefits of a grace period in student loans are as follows:
– Providing graduates time to find employment without the immediate pressure of loan repayments.
– Allowing graduates to plan and establish their finances effectively.
– Offering an opportunity to prepare for the repayment process like paying the interest rate during the moratorium period, if the budget allows.

Can students make interest payments during the grace period?

Yes, students can make interest payments during the grace period. Paying the interest during this time can be beneficial as it prevents the interest from being added to the principal amount, reducing the total loan repayment amount. Some banks even offer rebates on interest if it is paid during the moratorium period.

What will be the impact on my credit score if I do not pay interest during the moratorium period?

There will be no impact on the credit score as it is an optional condition. You can start repaying the loan along with the interest after the moratorium ends.

To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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