Grace Period Outreach & Counseling Best Practices
There’s an ancient proverb that says the journey of a thousand miles begins with a single step.
At Student Connections, we believe that getting student loan borrowers off to a great start as they leave school sets them up for success as they start repayment. And that means it’s critical that you work with your borrowers even before their repayment officially begins.
Educating your borrowers during their student loan grace period is the step that starts their repayment journey off on the right foot. In this guide, we’ll walk you through best practices for grace period outreach and counseling tips when communicating with borrowers.
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What is 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 Consider Grace Period Outreach?
Simply put, it’s human nature that makes the grace period an opportune time for influencing borrowers and creating positive outcomes. That’s because it’s human nature to retain information the best when we need that information the most.
And borrowers need repayment information the most when it’s immediately relevant: just before they begin their repayment, during their grace period. So the grace period is your opportunity to communicate with borrowers when they’re most ready to listen.
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.
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Six Tips for Effective Grace Period Outreach
Here are some ways you can capitalize on grace period outreach to help create positive outcomes for your borrowers once they enter repayment:
1. Establish yourself as a trusted advisor
Make sure borrowers understand that you are there to help. Setting up this relationship early on will make them more likely to reach out to you later on if they run into trouble.
2. Educate your students about their loans and repayment options
You’re already doing this through entrance and exit counseling, and probably also through financial education. Look for opportunities to connect with your students and former students to educate them during the grace period, too.
Open the lines of communication between the borrower, your school and the loan servicer.
Help borrowers think about whether they’re ready for repayment, including giving them an estimate of what their loan payments are likely to be.
Explain their options, such as the fact that several types of repayment plans are available that might help loan payments to be more affordable, and especially what to do if they run into trouble later on.
3. Determine how you will communicate with grace period borrowers
How will you build that trusted advisor relationship? When will you reach out and how often? Phone calls, emails, letters – what is the most effective way to reach your borrowers? Phone calls are great for having a discussion about the borrower’s individual situation. Written communications, like emails and letters, allow you to provide some information and encourage the borrower to call your office.
4. Provide multiple opportunities for updating contact information
You need to have updated and accurate contact information for borrowers, especially after they leave school. Identify how and where this information is stored, and think about how it’s maintained. Check with other departments on campus that may have student and alumni contact information, and establish a process for sharing information as needed.
5. When you’re talking with borrowers, ask helpful questions
Not challenging or scary questions, but questions that get them to think about what they already know and what else they might still need to know. These questions can also get them thinking about their future plans and how those plans might affect the ability to repay their loans.
6. Consider outsourcing your grace period communications
If you’re wondering when and how you could possibly fit this important outreach into your already busy days, then consider partnering with a third-party vendor. The Student Connections team can perform borrower outreach on your behalf as part of our Borrower Connect comprehensive or select services, including grace period counseling and communication with borrowers in various stages of repayment.
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