Student Loan Deferment: An Ultimate Guide
If you’re having difficulty making your student loan payments on time each month, you are probably wondering if there’s any way to get some help. One option you might be suitable for is deferment, which allows you to postpone your payments briefly. Here we’ll discuss deferment, how you can qualify for it, and the pros and cons.
When it comes to handling your student loans, you have many various available options. One option that you can consider is deferment. Deferment grants you to temporarily postpone the payments that you are making for your loans. This can be a suitable option if you have financial problems or are incapable of making your payments on time each month.
There are several different types of deferment available, so it’s very important to educate yourself about the qualification requirements that each one offers. Overall, most deferments are available for borrowers who are enrolled in school at least half-time, are unemployed or underemployed, or are experiencing economic hardship.
If you think you may be suitable for a deferment, contact your loan provider to discuss your options and determine if deferment is right for you.
What Exactly Is Student Loan Deferment?
If you’re having problems paying your loans on time, you may consider deferment as a way to reduce or even cancel your monthly payment temporarily. But what actually is student loan deferment? And how do you qualify?
Here are things you need to know about student loan deferment.
- Deferment is a limited delay of student loan payments. If you are qualified for deferment, you can temporarily stop making payments on your loans or even make reduced payments for a distinct period of time.
- There are two types of deferment: mandatory and discretionary. Mandatory deferments are only available in certain situations, such as economic difficulty, unemployment, or military service. Discretionary deferments are granted at the lender’s discretion, and the borrower usually needs to show genuine financial hardship.
How Does Student Loan Deferment Work?
As we already mention, deferment is for people struggling with their monthly loan payments. Student loan deferment is a way to help your financial strain, but it’s not a good option in the long run.
There are two types of deferment: mandatory and discretionary. Mandatory deferment is applicable only for certain types of loans, such as Stafford Loans. Of course, you meet the needed criteria. Discretionary deferment is available for all kinds of loans and is granted at the lender’s discretion.
To be suitable for mandatory deferment, you either must be enrolled in school at least half-time or be unable to find full-time employment. You are also ideal for this if you are having financial difficulty.
To qualify for discretionary deferment, you must prove that you’re facing real financial difficulties, medical hardships, or other diminishing situations.
If you qualify for deferment, your payments will be postponed for a certain period. During this time, interest will continue to accumulate on your loans. This means that once the deferment is done, you will have a higher balance to pay off.
Student Loan Deferment vs. Forbearance: What’s the Difference?
If you’re having problems making your student loan payments, you may consider deferment or forbearance as a way to make things more manageable. But what’s the difference between the two?
Deferment is a temporary halt of loan payments, which can be helpful if you go back to school or have financial difficulty. On the other hand, forbearance is when a lender agrees to let you make smaller payments or temporarily stops them.
Both of these options can give you some space for your student loans, but there are some differences you have to keep in mind. For one, interest continues to appear on your loans during forbearance, even though it may be temporarily suspended during deferment. That means if you choose forbearance, in the end, you will pay a more significant balance on your loan.
Also, deferment is usually available only for federal student loans, while forbearance is commonly an option for both federal and private loans.
So, which option is the right fit for you? It all depends on your individual circumstances. If you’re facing financial problems, deferment may be the better option since it could help you get back on your feet without adding additional interest. However, suppose you are facing immense hardships. In that case, forbearance can temporarily help you by blocking or suspending your payments, but in the end, you are paying the interest on your balance.
How Do I Qualify for a Student Loan Deferment?
To be able to qualify for mandatory deferment, you must meet the specific requirements for the type of deferment you’re looking for. If you’re searching for an economic hardship deferment, you need proof of financial struggles blocking you from making your monthly loan payments.
To qualify for discretionary deferment, as well you need to meet the necessary requirements. If you are searching for discretionary deferment, you need to prove genuine financial problems, medical hardship, or any other diminishing hardships stopping you from making payments.
Alternatives to Student Loan Deferment
Forbearance allows you to temporarily lower or stop making payments on your loan. This option can be convenient for people facing financial hardship or who cannot make their monthly payments. But don’t forget, the interest will still occur on your account, even if you are not making payments.
Income-Driven Repayment Plans
Income-driven repayment plans revolve around borrowers’ income and family size, which help determine the monthly payment amount. These plans can help borrowers to make repayments more affordable if they are struggling with monthly payments. However, it is essential to remember that these plans will result in a longer repayment period and will increase the overall cost of the loan.
Student Loan Consolidation
Student loan consolidation grants borrowers to merge multiple loans into one single loan. This can help reduce the repayment process and lower the monthly payment amount. With this one as well, it’s crucial to know that it will result in more extended repayment and increase the total cost of the loan.
In this article, we’ve talked a lot about student loan deferment, but what are some final thoughts on the subject? Most important to keep in mind is that this is not something that will make your loans disappear. In the end, you will still need to pay them off. With that said, a student loan can be a precious tool if you struggle to make payments. Also, it’s imperative to know that there are different options, and you should research the topic and consult which one suits you the best.
In the end, deferment can be an excellent option if you have financial hardships to help you get back on track with your payments. With a little bit of inquiry and help, you can find a solution that works the best for you and your budget, but remember, it’s only temporary.