Student Loan Deferment
College is an investment that many people make in the hopes of gaining access to a high-paying career. A large population of college students in the United States have taken out student loans at some point or another to pay for their education. Usually, student loan borrowers are given a grace period after graduating in which they are not responsible for making any payments on their student loan debt. After this grace period ends, they become responsible. This is around the time that many college grads begin to weigh their repayment options. So, what happens when these loans seem impossible to pay back? It’s possible to apply for student loan deferment and postpone having to make student loan payments. In this article, we will discuss how you can apply for student loan deferment and what it takes to qualify.
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What is student loan deferment?
Student loan deferment is a way to put a pause on making your monthly loan payments. In many cases, qualifying applicants of student loan deferment are able to temporarily put a halt on their student loan payments for up to three years. However, it’s important to remember that you should probably avoid going into deferment unless you really need to. Some loans are safer to defer than others. For example, deferring a subsidized federal loan or a Perkins loan isn’t as bad because you won’t have to worry about accrued interest.
If you’re struggling to make ends meet, always look in to loan forgiveness or getting on an income-driven repayment plan first. If you’re still having trouble with your student loan repayment and you can’t afford to make any monthly payments, then it might be time to resort to student loan deferment. The goal is to try to get back to making payments as soon as possible.
How to defer student loans
Student loan deferment is a process, and there are certain criteria that you will have to meet in order to qualify. in many cases, qualifying applicants will be able to defer their student loans for up to three years.
Applying for student loan deferment is usually pretty straightforward. You’ll need to contact your loan servicer and let them know that you would like to put your loans in deferment for a specific period of time. Your loan servicer will probably request additional documentation like proof of unemployment benefits. Once you send in your application and required documents, you will need to wait to see if you qualify. Continue to make student loan payments until you are granted deferment.
Types of student loan deferment
There isn’t just a one-size-fits-all student loan deferment option. Several different types exist and you might qualify for various types depending on your situation. Here are the different types of student loan deferment:
- In-school deferment: This type of loan deferment pauses your student loan payments during the time that you are enrolled in a qualifying college or career school. To be eligible, you must be enrolled at least half time. Once you graduate, you will be given a six-month grace period in which you will not be responsible for making loan payments. If you are a Parent PLUS borrower, you can may be eligible to receive a similar kind of loan deferment if your student is enrolled in college or a career school at least half time. There is no limit on how long your loans can be deferred with an in-school deferment.
- Unemployment deferment: Borrowers who are unemployed may be eligible to receive this type of student loan deferment. To qualify, you must be receiving unemployment benefits and you must be actively looking for full-time employment. In most cases, you will need to be registered with some type of employment agency, if there is one within 50 miles of your place of residence. Through this type of deferment, you can you’re your loans deferred for up to 36 months, but you will have to reapply every six months.
- Economic hardship deferment: You may be eligible to apply for this type of student loan deferment if you receive some sort of state or federal assistance such as from Supplemental Nutrition Assistance Program or Temporary Assistance for Needy Families. If you are having financial hardship due to only working part-time and making a monthly income that is less than 150% of your state’s poverty line, then you could also qualify for this type of deferment. Borrowers volunteering in the Peace Corps are also eligible. This type of deferment can last for up to 36 months but you will need to sign up for it again every year unless you are in the Peace Corps.
- Military deferment: Active duty military members may qualify to have their student loan payments deferred as long as they are serving in anything war, military operation or national emergency based. Military deferment will last as long as you are active duty but you may also apply to have it for up to 13 months after you are done serving or until you are back in school for at least half time.
- Cancer treatment deferment: Borrowers who are undergoing cancer treatments may request to defer their student loans during the course of their treatment. Cancer payments may access this request for on the federal student aid website.
The various student loan deferment options listed above are the most common types, but there are more. You can qualify for student loan deferment if you are in any of the following situations:
- You are enrolled in a graduate fellowship program.
- You are currently in an approved rehabilitation training program for a disability.
- You are in the process of seeking or obtaining student loan forgiveness for a Perkins loan.
If you are a borrower who has a student loan balance dating before July 1, 1993, you may be eligible for even more deferment options such as deferment for working mothers.
Is it bad to defer student loans?
Student loan deferment isn’t always bad, but it can get expensive, especially if you have unsubsidized loans or private loans. The reason for this being that these loans will always accrue interest during the time period that you defer them. Once it’s time for you to start paying them back again, you will owe all of the interest that you accrued on top of the original loan balance. However, subsidized loans do not accrue interest during deferment, so therefore are not as dangerous. In any case, student loan deferment is always better than student loan forbearance, which is another way to temporarily put a stop to your monthly payments. This is because with forbearance, there is always interest accruing, regardless of the loan type.
Income-driven repayment as an alternative to student loan deferment
If you are experiencing financial hardship, you are probably already under enough stress as it is. If you want a guilt-free way of getting rid of your student loan debt, you may want to consider an income-driven repayment plan. Here are some of the benefits of an income-driven repayment plan:
- Your monthly payment will be relatively low: If you choose to go on an income-driven repayment plan due to financial hardship, it’s possible that you are monthly payments could be $0 a month.
- You might be able to get a break on interest: In some cases, on income-driven plans, you can have your interest waived. This can last for up to three years.
You can use it toward earning student loan forgiveness: Some loan forgiveness programs strongly recommend their applicants to be on an income-driven repayment plan. Even if you aren’t planning on applying for loan forgiveness, after 20 to 25 years of being on an income-driven repayment plan, the remaining balance of your loans is forgiven.