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How Taking a Semester Off Can Affect Your Student Loans

Taking a Semester Off Impacts Student Loans
January 14, 2019

The reasons people may have for taking a semester off from college vary. Some students may experience family emergencies or health issues. There may be concerns about running out of money or students may be presented with a once-in-a-lifetime opportunity that would take them away from school.

Whatever the reason, students who choose to take a semester off from school may not be aware of how this action could affect repayment of their student loans. Knowing what to expect and how to manage those loans is crucial to keep from falling behind on payments or losing the valuable protections that surround federal student loans.

Taking time off could trigger payment due dates. Student loan lenders are notified each semester when students register for classes. It is important to note that the lenders are also notified if students fail to register, or if the number of hours they register for falls below half time, or six credit hours, per semester.

These actions can trigger a repayment notice, because most loans become due at that point. However, federal student loans generally offer a six-month grace period, so a single semester off would likely not affect the timing of the loan repayment.

The type of federal student loan matters as well. Subsidized Stafford loans do not accrue interest while a student is attending school at least half time. This extends to the six-month grace period as well. However, it is important to know how a semester off might affect your eligibility for these loans.

According to Federal Student Aid, an office of the U.S. Department of Education, there is a time limit on how long you can receive loans. The maximum eligibility period is generally equal to 150 percent of the published length of your current program. Students who have only taken the minimum number credit hours to qualify for full-time status may find they are close to their limit if they take a semester off.

The six-month grace period does not usually apply to private student loans, however. This is why borrowers need to know what the lender's policy is regarding taking a semester off before they make the decision.

It always helps to get a jump-start on paying down any kind of loan. There is no prepayment penalty for paying off any student loan early, whether it is a federal or private loan. If possible, it is a good idea for those planning to take a semester off to figure out a way to make at least interest-only student loan payments during the time off.

Doing so could make a big difference, making it easier to pay down the principal quicker once the program is finished. This applies to all students with student loans, whether they choose to take a semester off or not.

Making these payments while taking a break can be especially beneficial for those with private student loans, particularly if there is not a grace period attached.

Choosing to take a semester off from school is a big decision. The Student Loan Ranger recommends that any student contemplating taking a semester off talk with the dean or advisers at their school prior to making a final decision.

A visit to the financial aid office is also a good idea. This way, both the school and the student will know what is going to happen and the student can be in good standing upon returning to both the school and the loans.