What is Student Loan Deferment?

Borrowers who cannot make their loan payments due to specific circumstances can turn to Student Loan Deferment for financial relief. To be eligible, your circumstances could include enrollment in school, unemployment, economic hardship or military service. When going through deferment, the borrower doesn’t need to make any payments on their loans and interest will not accrue. Once the deferment period is over, however, the borrower will need to start making payments again.

It’s important to note that not all loans are eligible for deferment. Federal student loans and some private loans may have deferment options available, but it’s best to check with your lender before applying. Additionally, certain kinds of private loans may not be eligible for deferment, so it’s important to read the fine print of your loan agreement. 

Is Student Loan Deferment The Right Option For you?

Depending on your circumstances, a student loan deferment can be the right option for you. Consider the following:

Types of loans:

Federal loans are usually subsidized and during a deferment period, the interest will not accrue. However, in private loans, you still need to pay interest during the deferment months. 

Smaller payments:

If you are able to make smaller payments or no payments for a small amount of time then student loan deferment can give you a good breather. But you need to start paying immediately after the deferment period ends. 

Financial situation

Your financial situation will determine if a temporary break is a good option. If your finances will not improve in the near future you should not consider deferment. 

How to get Student Loan Deferment?

Federal Loans:

The process of obtaining student loan deferment for federal loans is relatively simple. Borrowers can apply online through the StudentLoans.gov website. They just need to provide some information, such as the type of loan, their account number and the reason they are requesting a deferment.

Private loans:

The process of obtaining student loan deferment for private loans is slightly different than that of federal loans. Borrowers should contact their lender directly to find out what their deferment options are and how to apply. Most lenders will require borrowers to provide proof of financial hardship, such as unemployment or illness.

Types of Student Loan Deferments

There are several different types of student loan deferments, depending on your individual situation. These include: 

  • In-School Deferment
    This type of deferment is available to students enrolled at least half-time in an eligible school and typically lasts for up to six months after you graduate. 
  • In-school parent loan deferment
    This is available to parents of students enrolled at least half-time in an eligible school. The parent can apply for a deferment on their Parent PLUS Loans and will not be required to make payments until after the student graduates or leaves school. 
  • Unemployment Deferment 
    If you experience unemployment or underemployment, this type of deferment can help you make payments until you gain full-time employment again. 
  • Economic Hardship Deferment
    This type of deferment is for borrowers experiencing financial difficulty due to economic hardship such as a change in employment, illness, or disability. 
  • Military Deferment
    If you are serving in the military on active duty, this type of deferment can help you make payments until your service is completed. 
  • Cancer Treatment Loan Deferment
    This is a form of financial relief for borrowers who have been diagnosed with cancer and need time to focus on their treatments but are unable to make their loan payments due to their medical circumstances. It lasts up to 12 months
  • Peace Corps Loan Deferment
    This is a form of financial assistance for borrowers who are currently serving in the Peace Corps. During this time, the borrower does not need to make any payments on their loans and interest will not accrue. Can last upto 3 years but if a borrower has already applied for an economic hardship or unemployment deferment, they will not be eligible for the peace corps loan deferment.

Pros and Cons of Student Loan Deferment

Pros: 

  • Allows borrowers to focus on other financial obligations.
  • Interest will not accrue during deferment period. 
  • Can offer some much needed relief for those facing difficult circumstances, such as unemployment or illness. 

Cons: 

  • Not all loans are eligible for deferment. 
  • May not be able to cover all of a borrower’s loan payments. 
  • Interest will still accrue during the deferment period, which can lead to additional debt when it comes time to start making payments again. 

Other alternatives to Student Loan Deferment

If student loan deferment doesn’t seem like the right option there are alternatives that you could choose from. These are:

Income-Driven Repayment:

Income-Driven Repayment (IDR) is an alternative repayment plan designed to help borrowers manage their monthly student loan payments. This type of plan allows borrowers to pay a percentage of their discretionary income, which is based on the difference between their adjusted gross income and 150% of the federal poverty line for their family size. The remaining balance is forgiven after 20-25 years of making qualifying payments. A borrower who qualifies for an income-driven repayment plan can also opt to switch back to a standard repayment plan at any time. It’s important to note that not all loans are eligible for this type of repayment plan, so it’s best to check with your lender before.

Forbearance

Forbearance is a type of repayment plan that allows borrowers to temporarily reduce or suspend payments for a specific period of time. This option may be available if the borrower is facing financial hardship, such as unemployment or illness. It’s important to note that interest will still accrue during the forbearance period, so it can lead to additional debt when it comes time to start making payments again. It is also important to note that borrowers who have already applied for an economic hardship or unemployment deferment may not be eligible for the forbearance.

The main difference between loan forbearance and loan deferment is that interest continues to accrue during forbearance, while it does not accrue during the deferment. Additionally, not all loans are eligible for forbearance, while most federal loans are eligible for deferment.

FAQs

What does deferment mean for student loans?

A deferment is an option that allows borrowers to temporarily postpone making payments on their student loans. This type of repayment plan may be available if the borrower is facing financial hardship, such as unemployment or illness. During the deferment period, interest does not accrue on most types of student loans.

How long can I have my loans deferred?

The maximum amount of time you can defer your loan depends on the type of loan and the circumstances surrounding it. For federal student loans, the period of deferment is typically up to three years, but for some types of private loans, it may be as short as six months. It’s best to check with your lender directly. 

Is student loan deferment bad for you?

Student loan deferment is not necessarily bad for borrowers. In fact, it can be beneficial if used responsibly. Deferment can provide relief for borrowers who are facing financial hardship, such as unemployment or illness. Additionally, it can help borrowers manage their monthly loan payments by lowering them temporarily.

Final Thoughts

Student loan deferment can be a great option for borrowers who are facing financial hardship, as it allows them to temporarily suspend or reduce their payments without accruing any additional interest. It’s important to check with your lender to make sure that you are eligible for student loan deferment.