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When Should You Consider A Student Loan Deferment?

Updated: Feb 3, 2023

If you're facing hardships, deferring your student loan payments may be a good option to consider.


Deferment is when a loan provider allows you to suspend or reduce your regular payments on your federal loans for a limited period of time.



But, when life after the government resumes, will it make sense to use this option?



Know the Eligibility Requirements to Use Deferment


Deferment can be an effective tool for managing student loan debt, but first, you need to meet specific eligibility requirements to qualify.


Generally, individuals can qualify for deferment if they


  • are enrolled in a post-secondary educational program and making satisfactory academic progress according to their institution’s standards, or

  • completing military service, or

  • doing an internship, or

  • financial hardship.



To apply for deferment, you'll need to fill out an application with your loan servicer, which typically involves submitting proof of your enrollment or financial circumstances.


Additionally, the type of deferment you select will affect the length and terms of your agreement..........this means you could possibly qualify for an interest-free deferment.


Keeping all this in mind, by carefully researching your options and understanding the eligibility requirements before applying, you can make sure that you're taking full advantage of student loan deferment as a way to manage your debt.




Types of Deferments




Unemployment Deferment


Deferment on most federal loans is available while you're unemployed and/or looking for work.


An unemployment deferment can be helpful if you don’t have enough money to pay your student loan each month while also meeting other financial obligations.


If you're currently unemployed or having difficulty finding a job, you may be eligible to have up to three years of your student loan payments deferred.


Whatever your situation might be, know that you have options. You may even be eligible to have your application fees waived when filing, depending on the loan servicer.


Research your loan to understand the options they provide and the requirements needed to qualify.



Economic Hardship Deferment


You can also apply for an economic hardship deferment. Many people struggle to make ends meet because they live below the poverty line or are on government assistance.


And that's with a college degree!


An economic hardship deferment temporarily suspends your loan payments, allowing you to focus on other priorities in life, like survival.


Many times, in this case, your interest may be covered by the government.


Check with your loan service provider to see if you can take advantage of this deferment.


In-School Deferment


Let's say you decide to return to school. An in-school deferment is when your loan payments are temporarily suspended, allowing you to take a break from making loans while attending college.


In most cases, this loan deferment is typically granted while enrolled at least half-time in an eligible college or career school, as well as for six months following graduation, leaving school, or dropping below half-time status.



Parent PLUS Borrower Deferment



Parent PLUS Borrower Deferment would be an option for you and your parents if they took out student loans to help you pay for college.


This loan is usually a direct loan, but it relieves you as a student and your parents if they vouch for your college career.


So if you're a borrower of a federal Parent PLUS loan, you can apply for this type of deferment.


A little thank you to your parents until you both get back on your feet.



Graduate Fellowship Deferment


A graduation fellowship deferment is an option if you are enrolled in an approved graduate fellowship program, mainly for doctoral students.


However, if you're enrolled in a master's degree program, you may be eligible to take advantage of this benefit as well and can qualify for a deferment.


Check with your loan service provider to be certain.


Rehabilitation Training Program Deferment


Suppose you're enrolled in an approved rehabilitation training program. This may include programs related to vocational training, drug abuse, mental health, or alcohol abuse treatment.


You can apply for a deferment while you tend to your physical and mental health.


Cancer Treatment Deferment


In another instance, you can apply for a deferment that lasts for the duration of your cancer treatment and then for an additional six months after it has finished.



Military Service and Post-Active-Duty Student Deferment


Lastly, there is deferment for students that are currently in active-duty military service or have recently completed qualifying active-duty service related to war, military operation, or national emergency.


Generally, you must have already exited your studies and completed any applicable grace period, with the deferment period lasting for 13 months after the event.


Alternatively, the deferment period may end sooner if you resume studying on at least a half-time basis.



Pros and Cons of a Deferment


Knowing the requirements, you may still be wondering if a student loan deferment is a right fit for your situation.


Let's look at the Pros and Cons.


Pros

  • Subsidized loans do not accrue interest while in deferment

  • It will not affect your credit score

  • It can offer temporary relief when dealing with a hefty financial responsibility.

Cons

  • Some private student loan lenders may not offer deferment options

  • For federally held loans, you will need to complete an annual recertification form to remain on deferment status, yearly

  • Unsubsidized loans may accrue interest



If you decide a deferment is the best for you, keep in mind that the process varies depending on the loan provider.


Also, understand that some lenders may require a minimum payment on the loans even while they are deferred.


Knowing how to apply for and qualify for student loan deferment can help you effectively manage your repayments and avoid penalties.


So to play it safe, take advantage of the automated system lenders may offer to help you track when your loan needs to be deferred or if certain action needs to be taken.



Major Take Away


Contrary to popular belief, most student loan providers want to help you repay your student loan. Mainly because they want their money, no matter how long it takes.


The longer you take, the better for them. But the reality is that sometimes in life, you have to do what you have to do.


Still, there's no shame in taking temporary relief from your student loan. Remember, it's temporary, so make a plan or budget to repay your loan when your deferment ends.

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