How Does Student Loan Deferment Work?

If you are having difficulty repaying your student loans, you might be thinking about deferring your payments. But are you eligible? And is it a good idea? How will it affect you in the long run? Let's unpack some common questions about student loan deferment. We'll touch on both federal and private loans below. How do you know which kind of loans you have? Start by logging into the Federal Student Aid website and reviewing the loans within your account. These will be your federal loans. Any other loans you borrowed are private. Check in with your lenders to find out any repayment details you need.

What is student loan deferment?

Student loan deferment is a form of temporary debt relief, and allows a borrower (who qualifies) to stop making payments on a loan, or drastically reduce the monthly payment. Eligibility is based on specific situations, such as enrollment in school at least half-time, unemployment, economic hardship, or active military service. If the loan is a federally subsidized loan, interest will not accrue; however, if the loan is federally unsubsidized, interest will accrue, and will be added to the total loan amount at the end of the deferment period. If the loan is private, full deferment may not be available, but most lenders offer some type of accommodation for those experiencing hardship, or they may offer deferment in extreme circumstances.

What's the difference between deferment and forbearance?

Student loan forbearance also allows you to postpone payments. However, there are some differences between deferment and forbearance:

• In forbearance, interest will always continue to accrue on all types of loans, which can increase your overall loan balance.
• Forbearance is typically granted for up to 12 months at a time, with a cumulative limit of 3 years, whereas deferment periods can vary depending on the qualifying circumstance and loan type.
• Eligibility for forbearance is based on financial difficulties, medical expenses, or other acceptable reasons determined by the loan servicer.

Will deferring my student loan affect my credit?

A deferment will not directly impact your credit score, as long as the account is still in good standing. It could, however, increase the age and the size of the total debt, which may impact your credit score. So while it won't directly hurt your credit score, it won't help your score, either.

Is it a bad idea to defer my student loans?

The answer to this is not cut-and-dry, and it is important to consider all of the factors and also discuss your options with your student loan servicer. If you are facing a significant financial hardship, deferring your loans can help you by allowing you to free up income for basic living expenses. If you are suffering a hardship, but might be able to make a partial payment, it might make more sense to discuss your situation directly with your lender to find out if you qualify for a modified repayment plan. Lenders may be willing to reduce your payments to help you through a difficult time.

How do I request deferment?

If you're facing hardship with repaying a loan and interested in your deferment options, reach out to your loan servicer directly to discuss the options that might be available.

The Bottom Line

Student loan deferments will give a borrower a temporary break from making loan payments, and in some cases, it may make sense to apply. However, the first step is to speak with your student loan servicer to understand all of your options. Being an informed borrower will allow you to make the best decision for your financial health.

Learn more about managing loan repayment