Students and graduates typically defer their student loan payments for two reasons. They’re currently in school or they’re finding it difficult to make payments after graduation due to their financial situation.
Let’s take a closer look at student loan deferment including when it might be the best option and how to do it.
What Is Student Loan Deferment?
The basic student loan deferment definition is it’s a temporary period of time when you don’t need to make student loan payments. You can defer both federal and private student loans as long as you meet the lender’s specific criteria.
Students may choose to defer their payments for a variety of situations including attending graduate school, internships, fellowships, residencies, and more. If you meet the criteria, you are pausing your student loan payments for a set period of time.
If you qualify for federal student loan deferment, you should pay attention to what type of loan you have. Federal Direct Subsidized loans do not accrue interest while in deferment, while Federal Direct Unsubsidized Loans and private student loans will continue to accrue interest.
TIP: Student loan “forbearance” is essentially the same thing as deferring your student loans, but is generally more specific to pausing private student loan payments related to financial hardships. If your federal student loans are in forbearance, they will accrue interest regardless of whether it’s a subsidized or unsubsidized loan.
When Should You Defer Student Loans?
There are many situations when it may make sense to defer your student loans. For example, if you go back to school and aren’t working, you may not be able to make payments. Student loan deferment provides payment relief for some of these most common situations:
1. Deferring for School
One of the most common reasons to defer student loans is starting school again. Most students qualify for graduate school deferment so long as they are enrolled at least half-time. Once you verify with your loan company that you are enrolled half-time and qualify, you’re no longer required to make loan payments until the end of the established deferment.
However, most loans will continue to accrue interest, so you may end up paying more on the loan by deferring for several years for school. You can always choose to make payments when you can during your deferment to help save on the overall cost of the loan.
2. Deferring for an Internship, Fellowship, or Residency
If you’re doing an internship, fellowship, clerkship, or residency, you could qualify for student loan deferment. Once you’re accepted into the program, you’ll want to reach out to your loan servicer to determine if you’re eligible. You may need to verify that you have a Bachelor’s degree or that your program will go toward a degree or certificate. If you qualify, you don’t need to make loan payments while you’re in the program. Many lenders allow you to reapply for deferment again every year or so if your program continues.
3. Deferring for Service
Many lenders provide deferment for people who volunteer in the Peace Corps or are active duty in the military. As an example, College Ave offers deferment for members of the Armed Forces and National Guard who are called into active duty for more than 30 days. The Peace Corps can work similarly. For each of these services, you will need to provide verification of membership in the organization and potentially of active duty. Once you qualify, you won’t be responsible for student loan payments until the deferment period ends.
4. Deferment for Unemployment
Though general COVID-19 pandemic-related federal loan relief is ending, people who are unemployed or experienced job loss can receive deferment (or forbearance) with their lenders. Unemployment deferment can help you get more control over your finances while you’re searching to find employment.
Since your last federal loan payment, your situation may have changed. Maybe you started school again or started a fellowship, and now you’re unsure of what to do with your student loans. Or maybe you’re still struggling financially from the pandemic. Whatever your situation, you should research all your student loan deferment options.
5. Temporary Financial Difficulties
If you have temporary difficulties making ends meet, you could qualify for student loan deferment. If you experiencing employment difficulties or large medical expenses, you may also be eligible for deferment. Financial difficulty deferment can give you the time you need to get back on your feet and get control of your finances. You may need to provide documentation and sufficient evidence of financial hardship to qualify. Another option for financial difficulties is to apply for forbearance.
Alternatives to Student Loan Deferment
Student Loan Deferment can be helpful for many, but it may not be available for every borrower. Some potential alternatives to a student loan deferment can include income-driven repayment which allows students to pay a monthly payment that makes sense for them based on their income. Another alternative to a student loan deferment is to refinance your student loans. Refinancing allows creditworthy borrowers to potentially get a lower interest rate that could save them a significant amount of money every month and over the life of the loan. One of the downsides of refinancing is that it does strip the borrower of federal loan benefits. Be sure to understand the terms of each option before choosing.
How to Defer Student Loans
To defer your student loans, you’ll need to contact your student loan servicers. Depending on your loan type (federal or private), you may have multiple servicers, and you’ll need to contact each one individually. You may also need to provide all the documentation necessary to prove to your lender that you qualify. This could include school enrollment information, fellowship acceptance letters, active-duty paperwork, and evidence of unemployment.
College Ave provides deferment opportunities for a variety of people, from graduate students to military personnel. We can help walk you through the process of deferring your student loans. If you’re looking for alternatives to deferment, our student loan refinancing may help you qualify for a lower interest rate and reduce your monthly payment. To get started on refinancing your student loans, check out our prequalification tool. If you need help with student loan deferment, contact our customer service team today.
