Student Loan Deferment: What You Must Know
Need to skip a month or two of payments? You may be eligible for student loan deferment and not even know it.
A deferment is an important tool for managing your student loans. Whether you’re going to school, facing temporary financial hardship, or looking for employment, deferment can give you peace of mind.
A deferment allows you to temporarily postpone making your federal student loan payments under certain circumstances. If you want to stop making payments because you’re returning to school, need to do a military tour, or are struggling with financial hardship, deferment could help you avoid default.
Eligible students with qualifying loans may defer repayment for up to three years while enrolled in an eligible degree or certificate program on at least a half-time basis, or if experiencing economic hardship.
Reasons To Consider Loan Deferment
The CARES Act is still postponing payments on most federal student loans. (The forbearance period has been extended multiple times throughout 2020 and 2021 as a result of the ongoing coronavirus pandemic. It was to expire on Jan. 31, 2022, then it was extended for an extra 90 days to May 1, 2022, in December 2021.)
Even if you haven’t lost your job, the COVID-19 pandemic might have caused changes to your financial situation.
Hence, if you’re having a hard time making your monthly payments, consider deferment or forbearance In 2020, the CARES Act allowed some borrowers with federal student loans to defer their loan payments.
People with private loans, federal Direct Loans, and FFEL program loans were eligible for an interest waiver for six months and could suspend their payments for up to 12 months.
Defer your loans if it doesn’t qualify for federal student loan relief and you have no job to help you settle them. You should also consider it if you are struggling with meeting your basic needs.
More so, if you have other debts to get rid of as quickly as possible, you can defer your loans. But this is not advisable for someone who is not financially capable of meeting other financial obligations while paying your student loans.
If you’re struggling to make payments, first look into whether you qualify for income-driven student loan payments, which typically lowers your monthly payment. If that’s not an option, other alternatives such as switching to an interest-only repayment plan may be helpful. Consider deferring or forbearing your payments until you’re in a more stable financial situation.
If you can do so without negatively impacting your credit score, consider refinancing with another lender offering a lower interest rate. You can also explore options like bankruptcy or student loan forgiveness in rare cases where it may be applicable.
Create a Game Plan
If you’re considering deferment, take the time to talk to your student loan service provider and understand the terms of deferment before pulling the trigger.
Creating a written budget can help you keep track of your spending and make sure you’re not making mistakes that will put you in a bind down the road.
It’s important to consider deferment of your student loans if you’re facing financial hardship and are unable to make loan payments at this time. But it’s also wise to look for opportunities to earn more, cut costs, and get out of debt so that it doesn’t hurt your finances later on.
You can talk to your student loan servicer about deferment options that may be available.
There are benefits of education student loans offer without having to worry about how you will pay for it upfront. If money is tight, however, deferment can provide temporary relief from your student loan payments.
Having a credible debt payment plan can help you focus on clearing out your loans, and start building wealth when you take out time to work and make your situation better.
Applying for Deferment
If you’re experiencing economic hardship, contact your student loan servicer to begin the process of putting your loans into deferment.
Most lenders will let you defer your monthly payments if you lose your job, experience an illness or disability, want to return to school, or get called to active military duty.
However, you’ll need to prove that you qualify for the economic hardship deferment program, and usually must also fill out an application through your lender.
You may be required to provide documentation within a specific period of how long you intend to retain a deferment till you can make a repayment of your loan. You’ll also need to fill out an application.
And you can request to consolidate your loans to receive a longer term to pay down the monthly payments if you do not qualify for deferment programs.
Handling Private Student Loans
It is possible that you are not given an option to defer your student loans. Consider talking to your lender to find out. Federal managed loans and private loans aren’t exactly subjected to equal guidelines.
If you have private student loans, you may be required to keep making payments regardless of your tight situation. This is a reason you should attend to your private student loans first before tackling your subsidized student loans.
It is always better to adhere to the rules regardless of the kind of student loans you are offered. Keep making repayments of the loans till you are given any adjustment to the payment plan or if you are approved for deferment. You’ll be able to avoid damage to your credit score and late fees penalties by doing so.