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Deferring the student loan can put your monthly loan payments on hold, often for up to three years. Even if you are eligible for a deferral, you probably shouldn’t use it unless the following conditions are true:
You have Federal Subsidized Loans or Perkins Loans – these do not earn interest during the deferral.
You can’t afford to pay off your student loans.
You will be able to restart the refund fairly quickly.
If you won’t be in good shape financially for a while, opting for an income-based repayment plan is a better choice.
How to defer student loans
To defer student loans, you must meet specific eligibility criteria and have a deferral period. You can only defer federal student loans for a limited time – in most cases, the maximum is three years in total.
To apply, send your student loans manager the appropriate application and any necessary documentation, such as proof of unemployment benefits. Your student loan manager must give you a stay if you qualify, but keep making payments until you are officially approved.
Types of student loan deferral
Here are the most common types of federal student loan deferral:
Many private lenders also allow you to defer student loans while you are in school or in the military. Contact your lender for eligibility details or to find out how to apply.
Is deferral of student loan bad?
Student loan deferral can be bad – or at least costly – if you have private or unsubsidized federal student loans. You can find out if your loans are unsubsidized by checking your studentaid.gov Account.
These loans generate interest during the deferral, and you will be responsible for paying them. If you do not do this while the loan is deferred, the unpaid interest will be capitalized, or added to your loan balance, when you enter the repayment.
Deferred repayment vs income-based repayment
Afraid to pay your long term payments? Registration at income-based reimbursement can offer the same immediate relief as a student loan deferral, as well as additional long-term benefits.
You will probably always pay less each month. Many factors contribute to how income-related payments are calculated. If you postpone loans because you’re not making a lot of money, your income-based payments could be as low as $ 0 – essentially the same amount as the suspension of payments.
You can also save on interest. One of the great advantages of deferral is that you do not pay interest on subsidized loans. But most income-oriented plans also waive these fees if your payments don’t cover accrued interest. This lasts three years, the same length as the postponements of unemployment and economic hardship.
You will potentially get a loan discount. After 20 or 25 years of payments, income-oriented plans write off any remaining balance on your loans. So instead of suspending payments for three years with a student loan deferral, you could pay under an income-driven plan and be much closer to forgiveness.
You can pay more interest overall on the income-based repayment as these plans extend your repayment term. Use federal student aid Loan simulator to calculate short and long term costs to see if an income-based repayment plan makes more sense to you than a student loan deferral.