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Life, as you likely know, can be as expensive as it is unexpected, and for student loan borrowers, that can lead to some stressful times. For some, the weight of college coursework makes it impossible to pin down a wage big enough to make student loan payments.
Similarly, some find that their post-grad financial situation has yet to improve, and still others find themselves in a position where unexpected yet pressing bills (e.g., medical bills, home repairs, etc.) make balancing the budget impossible when a costly student loan payment is included.
Fortunately, many lenders, both private and federal, offer deferment options allowing for momentary relief from financial hardship. Deferment is one of the options borrowers have when they can’t pay student loans.
When you defer student loans, you will not have to make payments for a certain amount of time. In most cases, however, interest will continue to accrue on your loans making them more expensive over the long run.
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Federal Student Loan Deferment
Those with federal student loans who are approved for deferment will enter into a period of non-payment or lowered payments. Depending on the type of loans you have, you may or may not be responsible for the interest that accrues during the duration of the deferment.
When subsidized loans (Direct Subsidized Loans and Perkins Loans) are in deferment, the government pays the interest for the duration of the deferment agreement.
If a borrower seeks deferment on unsubsidized loans (e.g., FFEL PLUS loans, Direct PLUS loans, etc.), they will be responsible for any interest accrued throughout the deferment period. If no payments are made during the deferment, the interest will be added to the principal balance of the loan.
Eligibility for Federal Student Loan Deferment
If you are enrolled in an eligible college, university, or career school as a part-time or full-time student, then it’s possible your loans will be automatically placed in deferment. If that is the case, your loan servicer should reach out to you to relay this information.
However, if you choose to defer your student loans due to other circumstances (e.g., economic hardship, unemployment, etc.), or if your loans weren’t automatically deferred due to your in-school status, then you will need to submit the proper documentation. This can be done by contacting your current student loan servicer (via phone or by visiting their website).
In addition to the request form, it is likely that you will need to submit documentation that will prove eligibility. It’s best to contact your loan servicer to discuss your options and determine what, if any, documentation is required.
Deferments are only granted to eligible student borrowers, and eligibility is typically limited to those who meet one or more of the following requirements:
- Enrolled as a part-time (at minimum) or full-time student in an eligible college, university, or career school
- Enrolled in an approved graduate fellowship program
- Enrolled in an approved rehabilitation training program
- Unemployed or unable to obtain full-time employment (valid for up to three years)
- On active duty military service (only as part of a military operation, national emergency, or war)
- Undergoing active cancer treatment
The duration of an approved deferment varies based on the eligibility requirements above; however, the periods generally run from six months to three years, with economic hardships generally limited to 12 months and unemployment hardships ending at three years.
It’s important to note that deferments are not the only option when it comes to decreasing or temporarily pausing your student loans. The federal government also offers eligible borrowers the opportunity to place their loans in forbearance, which can be done if they are experiencing financial difficulties, incurring medical expenses or have to take a medical leave from work, have a change in employment, or any other reason as determined by the loan servicer.
Keep in mind that forbearances, though similar to deferments, will require that the borrower pay all interest accrued on the loan. For this reason, it’s best to determine deferment eligibility before proceeding with a forbearance.
Private Student Loan Deferment
Many private student loan lenders offer private student loan deferment, allowing borrowers to pause or lower their payments if they meet lender-specific eligibility requirements. However, it should be noted that private student loan deferment does not offer the same “no interest” benefit as subsidized federal loan deferments.
In other words, private lenders typically capitalize unpaid interest, which will increase the amount—and potentially the duration—of your loan agreement.
Most lenders, including Sallie Mae, PNC, and College Ave, extend deferments to those who meet basic eligibility requirements similar to the forbearance requirements set forth by the federal government (i.e., at least part-time enrollment, economic hardship, active military duty, and unemployment).
If you are trying to figure out how to defer your private student loans, you should know that you will likely need to submit a request form or application to your servicer or lender. However, to determine the process and eligibility requirements, contact your loan servicer directly or visit their website for additional information.
The Case Against Deferring Student Loans
For some, deferring student loans may be the only solution to a temporary change in their academic, professional, or financial status. However, in most cases, particularly if you have unsubsidized or private loans, deferment can increase the total amount of your loan.
As such, experts recommend that borrowers who are not eligible for interest-free deferment consider alternative payment arrangements before pausing their student loans. Income-driven repayment plans for federal student loans and interest-only payment plans can temporarily decrease your loan payment, allowing you to make manageable payments as opposed to pausing payments that can significantly increase the total loan principal.
You can use this student loan deferment calculator to estimate the costs and impact of deferment.
Author: Dave Rathmanner
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