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Is Student Loan Deferment a Right Option for you? Let’s Explore


  • Patrica Johnson
  • 373
  • Thursday, March 02, 2017
Student Loan Deferment

When enrolled in school, it can be easy for you to overlook the fact that you have student loans to pay off. But officially you are in a deferment period for your student loans—and for these types of loans, interest is increasing even though you’re not making payments.

Usually, you need to start the repayment process when your grace period ends. However, there are cases when student loan deferment is considered as a temporary solution to postpone the payments until you are able to make them frequent again.

Definition of the student loan deferment

A deferment is known as a period of time when it is not essential to make payments on the principal and interest of a student loan.

There are a number of reasons for the deferment of loans, including when:

  • You are unemployed (up to 3 years)
  • You are enrolled minimum for half-time in school
  • If you work for the Peace Corps
  • During the time of economic hardship (up to 3 years)
  • In the first few months (6 months to 9 months) after your graduation
  • On active military duty and the first 13 months after final active duty

Even though student loan deferments can be granted for both federal and private student loans, there are some basic differences between how deferred loans are managed when it comes to the growth of loan interest.

In case you are dealing with a federal Perkins loan, or direct loan or a subsidized Stafford, the government is responsible for paying the loan interest during your deferment. As a result, you will owe the same amount of money as you did in the starting of your deferment because the interest accrued in that time period will have been taken care of by the government.

On the contrary, if you have opted for an unsubsidized federal Stafford loan or a Direct PLUS loan, then the government will not be liable to pay your loan interest throughout your deferment or forbearance.

There is this option for you to pay only the interest while you are in your student loan deferment so that to avoid it being added to your principal balance. You can also allow the interest to grow and pay it off later with the rest of your loan.

Be aware, though, in case you choose not to pay any interest throughout your deferment period, you will be most likely end up paying more in the future as your interest will be added to your principal.

Let’s learn about the forbearance of student loans

As many people know, forbearance is just like deferment, but the only difference is that it covers those students who do not qualify for a deferment period (consider the above-mentioned bullet points to know the qualifying circumstances).

If you have been granted forbearance, then your lender (private or federal) will allow you to stop making loan payments or ask you to make reduced loan payments for a time period of up to a year.

During this period, for both federal as well as private loan, interest will continue to increase and will be added to your principal.

Basically, forbearanceis of two types:

  • Discretionary – Your lender is the one who will decide whether or not to grant forbearance. For example, if you are facing any financial hardship and/or illness, then you can apply for discretionary forbearance.
  • Mandatory – Your lender will be vital to allow a forbearance period if you meet the crucial requirements.

Following are some of the situations in which you might qualify for mandatory forbearance:

  • Attending a medical or dental residency or internship.
  • Owingover 20% of your total monthly income in student loans.
  • Offering a teaching service that qualifies for teacher loan forgiveness.
  • Being a member of the National Guard and activated by your state’s governor (incase you aren’t eligible for deferment for your military status).

Skipping only one payment with student loan

While student loan deferment and forbearance should be considered as short-term solutions for you over the life span of your loan, you may want an even shorter termed solution—like skipping 1 month when things get rough on your budget. This is where you should consult your loan service provider to explore the options that you may have. If you miss a monthly payment, then there is a strong possibility that your lender could mark your loan as delinquent, andthat could hurt your credit a lot.

All in all, if your primary objective is to payoff your loans as fast as possible, then you can use your option for student loan deferment or forbearance cautiously or not at all.

Don’t let student loan debt hold you back!

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