Submitted by: Shannon Cross, USA Funds
Account Executive
There’s an
ancient proverb that says the journey of a thousand miles begins with a single
step.
Educating your
borrowers during their student loan grace period is the step that starts their
repayment journey off on the right foot.
What’s the grace period?
Most borrowers of
subsidized and unsubsidized loans qualify for a grace period of six months
after their last date of at-least-half-time enrollment. During grace period the
borrower does not have to make any payments, and certain borrowers who qualify
for an interest subsidy won’t accrue any interest during this time either.
The day after
grace period ends, the borrower officially begins repayment. Typically, unless
the borrower qualifies for a deferment, the first loan payment is due within 60
days of beginning repayment.
The grace
period is available only once for each loan. If a borrower uses the entire
grace period on a loan and then returns to school at least half time, for
example, then that student will not qualify for any further grace period when
leaving school again — and immediately will enter repayment. Note, however,
that if a student uses only a portion of the grace period before returning to
school at least half time, then that student once again will qualify for the
entire grace period upon leaving school again.
Why reach out during grace?
Here are some other reasons why grace period is a perfect time to reach out to
borrowers:
·
When
students leave school, they’re done with their studies and other distractions
of college life and can focus better on the student loan repayment that’s about
to begin.
·
The
longer borrowers are out of school, the more difficult they are to contact for
counseling. Over time they move, and they change their email addresses and
phone numbers.
·
The
loans of borrowers in their grace period are still in good standing, so those
borrowers are less likely to want to avoid communicating with you. You’re more
likely to have their focus, their trust and their attention.
How do you create positive outcomes?
Here are some ways to
capitalize on borrowers’ grace period to prepare them for successful student
loan repayment:
Educate your students about repayment
plans early and often.
As you think about counseling on repayment plans, consider all the options you
have for connecting with students about the issue — especially during their
grace period.
·
Develop a strategy for grace period
communication. Take a
close look at your current approach. When should you reach out, and how often?
What’s the most effective way to reach your school’s students: phone calls,
letters or emails? The best strategy varies according to student population.
·
Provide multiple opportunities for
updating contact information.
You can’t help borrowers if you can’t find them. So identify how and where
student contact information is stored and maintained. Consider how you’ll
update your borrowers’ contact information over time.
·
Ask helpful questions when counseling
grace borrowers. Borrowers
typically respond to a variety of questions to help determine which repayment
plan will work best for them. Adopt this approach at your school, focusing on
questions that get borrowers to think through what they already know and what
they need to learn.
·
Consider outsourcing borrower
communication. If
you’re wondering how and when you can possibly fit all of these ideas and
strategies into your already busy day, then consider partnering with an outside
organization on communication with grace period borrowers.
For
additional information and best practices for contacting and counseling
borrowers during grace periods, visit www.usafunds.org.
