If you’re struggling to make your student loan payments, you may be considering deferment as a way to temporarily postpone your payments. But what is student loan deferment? Read on to learn everything you need to know about this option.
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What is Student Loan Deferment?
Student loan deferment is a type of forbearance that allows you to temporarily postpone making payments on your student loans . If you qualify for deferment, you won’t have to make payments on your loans for a specific period of time. During deferment, the federal government may pay the interest on some types of loans. If you have a private loan, the lender might also agree to defer or forbear your loan.
What are the types of deferment?
There are numerous types of deferment available for federal student loans, each with different requirements and conditions. Some common examples include:
-Unemployment deferment: If you are unemployed or underemployed, you may be eligible for an unemployment deferment. This type of deferment can last for up to three years.
-Economic hardship deferment: If you are experiencing financial difficulties, you may be eligible for an economic hardship deferment. This type of deferment can last for up to three years.
-Parental leave deferment: If you are taking time off from work to care for a new child, you may be eligible for a parental leave deferment. This type of deferment can last for up to 12 months.
-Educational loan debt consolidation: If you consolidate your federal student loans, you may be eligible for an educational loan debt consolidation deferment. This type of deferment can last for up to five years.
How to apply for deferment?
A deferment is a temporary postponement of loan payments for certain defined periods. During deferment, principal payments are delayed, but interest continues to accrue. Subsidized Stafford Loans and all Perkins Loans are deferred automatically during periods of enrollment and half-time enrollment. Unsubsidized Stafford Loans, PLUS Loans for Parents and Graduates, and Consolidation Loans first disbursed prior to July 1, 2006 also accrue interest during deferment; however, the borrower may choose to pay the accrued interest or allow it to be capitalized (added to the principal balance).
There are two types of deferments: mandatory and discretionary. Mandatory deferments are available for borrowers meeting specific conditions such as unemployment, economic hardship, disability, or enrollment in an approved graduate fellowship program or rehabilitation training program for the disabled. Discretionary deferments are available at the lender’s discretion for borrowers meeting other specified conditions such as enrollment in an approved graduate or postgraduate study program or enrollment in an approved residency program for physicians and dentists.
What are the benefits of deferment?
A deferment is a great option for those who are facing financial hardship or are returning to school. By deferring your loans, you can temporarily stop making payments on your loans. This can help you free up some money each month to help you pay for other expenses. There are a few different types of deferments, so be sure to research which one would be best for your situation.
What are the drawbacks of deferment?
While a deferment can provide some much-needed financial relief, it’s important to remember that interest will continue to accrue on your loans during this time. This means that when your deferment period ends, you’ll likely owe more than you did before. In some cases, you may be able to capitalize (add to the principal balance) the interest that accrued during the deferment period. This would allow you to pay the interest off over time, rather than all at once when the deferment ends.
How to make the most of deferment?
If you are struggling to make your student loan payments, you may be considering deferment as an option. deferment allows you to temporarily postpone making your student loan payments. This can give you some breathing room if you are experiencing financial hardship. However, there are some things you should know before you decide to defer your student loans.
What to do during deferment?
While your loans are in deferment, you’re not required to make payments. However, interest will continue to accrue on your loans, and will be added (capitalized) to your principal balance if you have unsubsidized loans, or if you choose not to pay the interest on your subsidized loans. You can minimize the amount of interest that accrues by making monthly interest payments or making lump-sum payments when you have the money available.
What to do after deferment?
A deferment is a temporary postponement of loan payments. During deferment, you don’t have to make any payments on your loans—principal or interest. If you have subsidized loans, the government pays your interest while you’re in deferment. If you have unsubsidized loans, you’re responsible for paying the interest that accrues during deferment. You can either pay the interest as it accrues or allow it to be capitalized (added to your principal balance), which will increase the amount you have to repay.
After your deferment period ends, you have a six-month grace period before you have to begin making payments again. If you don’t make a payment during your grace period, your loan will go into forbearance or default.