What Should You Know About Student Loan Deferments?

Student loans are often the first type of debt that many people take on. They are also next to impossible to eliminate during a bankruptcy, so they have the potential to follow a person for the rest of their lives if they’re not able to pay them off quickly. Unfortunately, it can be difficult to make payments when your income doesn’t provide enough money. Because this is actually a common situation for many new graduates, the option to defer payments is becoming more popular.

As the U.S. Department of Education explains, a student deferment loan is a period during which the repayment of the principal and interest rate of your loan is temporarily delayed.

The above sentence just goes to determining the authority of deferred student loans as a form of student aid.

Definition of student loan deferments:

Deferring student loan payments means delaying payments for a period of time. This can allow a person to pursue higher education or give them the extra time they need in their job search. There are several disadvantages to deferring student loan payments, however.

Period of delayed repayment

There is a limited amount of time that you can defer your loans for. Most federal student loans allow a person to defer their payments for six months to one year. Sometimes this can be extended if a person is continuing their education, depending on the type of loan that you have. At the end of this time, payments must resume.

Claims for deferred student loans

You have to have a good reason to defer. Specifically, you have to be able to prove that you have circumstances that are preventing you from making payments. Being in school at least part-time, being unemployed or having a physical disability can qualify a person for a deferment. You should be aware, however, that you cannot claim financial hardship without giving a reason. This means that you cannot get approved for a deferral in order to get time off from your loan payments to pay off other debt.

One-time deferment of loan

You can only defer payments once. Deferments are only allowed once per loan. This means that once you choose to defer your payments, you will never get another chance to do so again. Because of this, it is important to make sure that you really need to defer your payments before applying for a deferment. If you can make your payments by cutting back on other expenses, then it is usually a good idea to do this rather than getting a deferral. Wait until you can no longer make your loan payments before applying for a deferral.

Accumulation of interest

Interest still accumulates while the loans are in deferment. This is one of the most overlooked facts about deferment. Even though you are not making payments, interest is still accumulating on the balance that you owe. This means that when you go back to making payments on your loan, your loan balance will be higher than when you started deferment. Depending on the type of loan you have, this could mean that your payments will be higher when you come out of deferment or that you will pay off your loans over a longer period of time. In order to avoid this, some people choose to make interest payments while they are in deferment. This prevents interest from accruing on the loan balance.

Loans can be deferred in a number of situations, such as-

  • Enrollment of at least half-time in school
  • If you have been unemployed for maximum three years
  • During periods of economic problems
  • If you serve in the Peace Corps
  • During active military duty and also for the first 13 months after concluding your military activities and duties
  • In the first six to nine months from the commencement of your graduation

Alternatives to student loan deferments:

If you do not wish to get involved or come any closer to something like student loan deferments, then there are alternate ways by which you can reduce your student loan burden.

You can get in touch with your lender and work out a repayment plan that suits you the best. Lenders are keener on seeing at least some of their money return than to see no returns at all. Talk to your lender and find out if they would be willing to reduce your payments or get you enrolled in a fixed income-based repayment plan.

For student aid, the federal government plays a major part in offering a variety of income-based repayment plans, where you can make payments depending on your earnings and wages.

If you are currently employed, your employer may also be able to assist you in repaying your loans and helping you out with your student loans.

Final thoughts

There are both good and bad sides to deferring student loans. While the best part about student loan deferment is that it gives borrowers a break from repayments, especially when they are facing a financial crisis, loan deferment, on the other hand, may also lead to burdening borrowers in the future. The key is to talk to your service provider or lender and explore the possible student loan and repayment plans that work out the best for both of you.

Back to top