What is student loan deferment?

If you’re struggling to manage your debt, student loan deferment can help. Postponing your loans allows you to reduce or stop payments for a set period, sometimes up to three years.

While the moratorium may provide immediate financial relief, you may end up owing more over the tenure of the loan due to the accrued interest. This guide covers the basics of deferment and other repayment options to help you decide which option is best for your particular situation.

COVID-19 Student Loan Payment Freeze
As part of the pandemic relief measures, all federally held student loans are automatically put on hold until December 31, 2022. No loan payment or interest will be charged during this period. In addition, collections on defaulted loans will remain suspended.

What is student loan deferment?

A student loan moratorium is when your loan monthly payments are temporarily reduced or postponed for a specified time frame.

You are not required to make regular payments when your loan is deferred. The deferment agreement specifies the period of time when you are allowed to pause the repayments. Borrowers should note that although the moratorium defers your payments, can continue to earn interest,

For federal loans: Depending on the type of student loan you have, the government may cover interest fees such as subsidized loans. Otherwise, you will have to pay only the interest to survive capitalized interestWhen the unpaid interest is added to the total principal amount of the loan.

In most cases, you will need apply for a student loan deferment, If you’re still in school, the deferral should happen automatically – if not, speak with a financial aid representative to make sure your enrollment status is reported accordingly. If you do not know the name of your servant, Here’s how to track it,

For Personal Loan: Availability and terms of the moratorium vary widely by lender. Some offer an opportunity for deferment if you’re in a financial bind, while others don’t.

You might want to contact the company directly. If you don’t know who your lender is, you can check with your school or request a copy of your credit report, which will list your current outstanding debts. See Our Guide to Finding Your Student Loan Balance for more information.

procrastination vs tolerance

Although both deferment and forbearance can defer your monthly student loan payments, each plan differs slightly:

● deferment piques interest for subsidized federal student loans
● tolerance get interest regardless of loan type

Additionally, the deferment can last up to three years, but the toleration limits at 12 months. check out our side by side comparison for more information.

When to defer your student loans

Your situation should guide whether deferring student loans is a smart move. Here are some important questions to consider before making a decision:

● What type of loans do I have?

It may be worth it if you have federally subsidized loans or applying for deferment. perkins loan, as they do not attract interest during deferment. However, it’s often a good idea to avoid deferring unsubsidized or private loans because of the high cost of accumulated interest. Consider finding out if you can make monthly interest-only payments instead.

● Can I pay less?

Remember, deferment reduces your monthly payment to $0. However, if you can manage a lower monthly payment (and you have federal student loans), you may want to consider an income-driven repayment plan instead.

● Is my financial situation temporary?

The meaning of moratorium is to give temporary financial relief. If you anticipate long-term financial struggles, you may want to apply for a plan that offers more support. ,see more below,

Loans that qualify for deferment

If you meet the criteria, you can defer any federal student loans. In addition, some private student providers may offer payment relief plans, but as noted above, rules and requirements vary by lender.

federal student loan deferment

The US Department of Education issues two types of direct federal student loans: subsidized and non-subsidized, The type determines how interest accrues during the deferral period.

government pays Monthly interest charges for the following types of deferred student loans:

  • Direct/Staffed Subsidized Loans
  • perkins loan
  • Direct Consolidation Loan (subsidized portion)
  • FFEL Consolidation Loan (subsidised portion)

Although, you will be responsible To pay the interest earned on these loans:

  • Direct/Staffed Unsubsidized Loan
  • Direct Plus Loan
  • FFEL Plus Loan
  • Direct Consolidation Loan (non-subsidized portion)
  • FFEL Consolidation Loan (non-subsidised portion)

private student loan moratorium

As mentioned earlier, private lenders do not offer standardized moratorium plans. However, providers can work with you if you are experiencing financial hardship.

As with unsubsidized federal loans, most private student loans continue to accrue interest during the moratorium. Finally, deferring your private student loans is usually not the best plan of action. (see below for More on Alternative Options,

how to avoid student loans

If you need to pause your federal student loan payments, you should contact your loan servicer to discuss options. In addition to in-school deferment, which is automatic for students enrolled in school at least half-time, you must fill out an application.

You can access the forms for federal loans through your StudentAid.gov Accountor contact your lender.

Continue making regular payments of your loans till you get an official decision regarding the moratorium. loan payment default put your loan in defaultNegatively affects your credit score.

Here are some situations where you can defer your loans:

  • Students in school: Federal student loans are automatically deferred for current students until six month grace period After graduation (or if you leave school). This only applies to students attending at least half-time or more. If you start receiving student loan payment bills while in school, contact your admissions office so they can correct this error. Also, know that despite the automatic grace period, you can still make pay while in school If you want to stop interest from accruing.
  • Parents at school: if you have a parent plus loan For your child, you can request a deferment if they are currently enrolled at least half-time. You will get the standard grace period of six months that a school student gets.
  • Unemployment: If you are unemployed or struggling to find full-time work, you can request a deferment of up to three years. You may need to show proof of unemployment benefits or be registered with an employment agency. In addition, you will need to renew your moratorium every six months.
  • economic hardship: You can potentially claim economic hardship for up to three years. receiving some form of government assistance may qualify you for it, as your income may drop by as much as 150% State Poverty Guidelines, You will need to renew this type of deferment every 12 months.
  • military service: You may qualify for student loan deferment if you are on active military duty or have recently completed it. If accepted, you will have a grace period of 13 months after your service ends or until you rejoin school on a half-time or full-time basis.
  • Peace Corps: You can get up to three years of deferment if you’re serving in the Peace Corps. You must submit an economic hardship application, although you do not need to reapply for the duration of your commitment.
  • cancer treatment: If you are undergoing cancer treatment, you can submit a request to defer your student loans for the entire treatment period, as well as up to six months after treatment.
  • Additional reasons: Deferment is also available if you are enrolled in an approved graduate fellowship program, a rehabilitation training program or if you have received a Perkins loan and are working toward it. perkins student loan cancellation,
How Long Can You Defer Student Loans?

as long as you can avoid yourself federal student loans is three years. With most deferred plans, you must reapply every six or 12 months.

time frame varies between private student loans Lenders, if they offer a moratorium at all. For example, private lender Sallie Mae allows a 12-month moratorium under special circumstances, with the option to renew up to five times.

Pros and Cons of Student Loan Moratorium

Stopping your student loan payments can seem like a blessing, especially if you’re living paycheck to paycheck. However, you should also consider the potential downsides of procrastination.

pros Shortcoming
● Prevents your student loan from going into default
● Allows you to focus on other high-priority bills
● Avoids monthly interest charges for subsidized loans during the moratorium period
● Additional interest consequences on non-subsidized and private student loans
● Need to reapply every year for deferment
● Maximum limit of relief can be three years or less

Pros of Student Loan Moratorium

In extreme cases of hardship, deferring your student loans can help you pay other urgent bills like rent and electricity.

If you’re volunteering your time or serving in the military, temporarily not having a student loan obligation allows you to give back to your community without extra weight on your mind.

And if you have subsidized federal student loans, you may be even easier, since your balance won’t grow with interest while your loans are deferred.

Cons of Student Loan Moratorium

Student loan deferment also has drawbacks, mainly if the federal government doesn’t subsidize your loans. This is because the interest will continue to accrue at a regular rate before being added to the total loan.

Let’s say you have a $20,000 unsubsidized loan on a standard 10-year payment plan with an interest rate of 4.99%. If you apply for a 12-month moratorium you will not be able to make any payments for the short term. However, our calculator shows that you’ll end up paying an additional $998 in interest – which will be added to the principal balance of your loan.

Try entering your own loan details here to see how the moratorium can affect your balance.

student loan deferment calculator

Also, you should be aware that student loans in deferment can affect your progress. student loan forgiveness program, For example, Public Service Loan Forgiveness (PSLF) Requires 120 eligible payments to qualify. If you defer the loan for three months, the payments you make during that time cannot count toward the 120, even if you are still working for a qualifying nonprofit. (However, payments you may have made during the COVID-19 pandemic repayment pause will be counted towards PSLF as if they have been paid,

deferment option

If you decide that avoiding student loans isn’t the best option for you, there are many other ways you can reduce your student loan debt to a manageable level.

work out a repayment plan

If you cannot make your minimum private student loan payment, you can contact your lender to discuss repayment options. Lenders will see nothing but some money, so they may be willing to lower your payments or work on another solution.

income-driven repayment plans

government gives a lot income-driven repayment plan Which can reduce your federal loan payments to an affordable portion of your disposable income.

You can find the following options:

employer payment program

With private or federal loans, your employer may also have program to help you pay off your loan, Check with your supervisor or human resources department to see if they offer student loan repayment assistance.


refinance your student loans Lowering your payments may be a way to help and potentially even cut down on the interest you pay. Although, refinancing federal student loan Generally not advised, as you may lose access to federal benefits such as income-driven repayment and student loan forgiveness.

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