Instances Where Student Loan Deferment Is Allowed
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Student loan bills can add up to significant payment amounts each month. However, there are many instances where a deferment might be preferable, especially if an unforeseen event has taken place, or you have decided to go back to school. Both public and private student loan companies offer loan holders the option to defer their payments for short periods of time. However, it is not a simple process to defer your student loan. Knowing when you would be able to defer, whether you should defer the payments, and what the consequences may be for that deferment should all be considered before taking any action. Still, for many it offers a way to stabilize finances, so that credit reports are not impacted, and the loan does not go into default. The following information is intended to give a basic overview of the deferment process, the usual circumstances that are considered acceptable for deferment, and what to expect if you decide to move forward.
What happens when the loan is deferred?
When your loan is deferred, the U.S. Department of Education freezes the account so that the due date for a payment on the principal, and any interest due, is suspended for a short period of time. You will agree to the length of time with the student loan servicer. The government will pay the interest for the Direct Subsidized Loans, or Federal Perkins Loans, but if your loan is unsubsidized the deferment may not stop the interest from continuing to accrue. Each loan servicer is different in their regulations, so make sure to ask about it.
How to get started on the loan deferment process
If you are going back to school and want to defer the payments until you are finished with your schooling, then the best way to do this is to speak with your financial aid specialist at the college you have decided to attend. With your permission, they can communicate on your behalf with the loan servicers and verify that you are enrolled and will be attending their institution.
If you need a deferment and are not returning to school, then the best practice is to contact the loan servicer, yourself. If you are not sure who your loan is being serviced by, you can look that information up by using the federal National Student Loan Data System. Using your FSA ID, you can look up the company that is currently servicing your loan and their contact information. Once you contact them, they can walk you through the next steps and the paperwork that will be needed in order to apply for a deferral. For most loan servicers, you cannot be 270 days behind on your payments and apply for deferment.
When student loan deferral is accepted
Other than returning to school, there are other instances where loan deferment is awarded. If you can prove extreme hardship due to loss of income, or job, and paying the loan would mean you would not have the money to pay for food, shelter and utilities, then you would most likely qualify for a deferment.
If you are on active duty in the military, and it is in connection with a military operation, war, or emergency in the nation, then you can petition to have your student loan deferred until such time as you are no longer in service to your country. If this is the case, then you will need to speak with your military liaison to get specific details on how this might be accomplished. This also applies to those who are serving in the Peace Corp. The deferment can be extended for the 13 month period following your tour of duty, or until you return to school.
If you are a parent who took out a Direct PLUS loan, then loan repayment is deferred for the first six months after your child leaves school.
Do you really need student loan deferment?
Many students believe that they need deferment when in reality other alternatives may work better in the longer term. You can reduce the amount you have to pay each month, if that is the issue with repayment. Most lenders offer repayment plans that can be income based, and some will charge as low an amount as $5 a month. Additionally, speak with your employer, if you are working. Many companies offer repayment plans.
Depending on the profession you have gone into, you may qualify for a loan forgiveness program, either through your employer, or through the state of Maryland. Most often, loan forgiveness is offered for those in the medical, legal and educational fields, in exchange for providing service in underserved areas or populations for a certain number of years.
Understand that loan deferment does not make the student loan amount that you owe disappear. It will still be there once the deferment ends. Determining how you will handle the debt for the long term is important in determining what your next steps will be. While deferment can buy you some breathing space, if the problems that placed you in this situation in the first place are not addressed, then the issue will not have been solved, only postponed.