Grace Period Law and Legal Definition
A grace period is a contractual term that allows for payment or performance past the due date of the debt or time for performance if made within a specified period after such date. Often, after the grace period ends without payment or performance by the person who is supposed to pay, the contract is suspended. In the context of an insurance policy, a grace period may exist to allow the policy to remain in effect for a certain span of time after the insurance policy premium was due, after which time span, the policy coverage will lapse. Generally, grace periods are not required to be included in most contracts.
For example, when a student loan is extended, the initial six-month period after the student graduates, withdraw, or drop below half-time enrollment is often the grace period. During this six-month period the student is not required to make any loan payments. However, if the student has a subsidized loan, it is to their benefit to make payments, because they are not responsible for the repayment of interest on their subsidized loans during the grace period. Grace periods depend on the type of student loan, so particular investigation should be made as to whether a grace period applies and whether interest accrues during the grace period.