Navigating Loan Deferment & Forbearance: A Comprehensive Guide

When it comes to managing student loan debt, understanding your options is crucial. Loan deferment and forbearance are two popular solutions that can provide temporary relief from your monthly payments. In this comprehensive guide, we'll delve into the world of loan deferment and forbearance, exploring their key features, eligibility requirements, and potential drawbacks.

Navigating Loan Deferment and Forbearance

Learn how to negotiate and appeal for additional financial aid >>

What is Loan Deferment?

Loan deferment is a period during which borrowers are allowed to temporarily postpone their federal student loan payments. During this time, interest does not accrue on subsidized loans, such as Direct Subsidized Loans and Federal Perkins Loans. However, interest will continue to accrue on unsubsidized loans, such as Direct Unsubsidized Loans and Direct PLUS Loans.

What is Loan Forbearance?

Similar to deferment, loan forbearance allows borrowers to temporarily pause or reduce their federal student loan payments. The main difference is that interest will continue to accrue on both subsidized and unsubsidized loans during forbearance, potentially increasing your overall loan balance.

Eligibility Requirements for Deferment and Forbearance

To qualify for deferment or forbearance, you must meet specific eligibility criteria. Some common reasons for deferment include:

  1. Enrollment in an approved graduate fellowship program

  2. Economic hardship

  3. Military service

Forbearance eligibility, on the other hand, may include:

  1. Financial hardship

  2. Illness

  3. Participation in a medical or dental internship or residency program

How to Apply for Deferment or Forbearance

To apply for deferment or forbearance, borrowers should contact their loan servicer and provide the necessary documentation to support their request. It's crucial to continue making payments until the deferment or forbearance has been granted to avoid delinquency or default.

Pros and Cons of Deferment and Forbearance

While deferment and forbearance can provide temporary relief, it's essential to consider the potential drawbacks.

Pros

  • Temporary relief from monthly payments

  • No interest accrual on subsidized loans during deferment

Cons

  • Interest accrual on unsubsidized loans during deferment and all loans during forbearance

  • Extended repayment period, potentially increasing the total amount paid

Check out our free CSS Profile Guide >>

Loan deferment and forbearance are valuable options for borrowers struggling with their student loan payments. However, it's crucial to evaluate your financial situation and consider alternative repayment plans or loan forgiveness programs before making a decision. By understanding the nuances of deferment and forbearance, you can make the best choices for your financial future.

There is a lot to be gained from our free general financial aid advice, but it’s also a very individual process. If you have remaining financial aid questions, email us to discuss more or book an individual session.

Previous
Previous

Loan Deferment Explained: Understanding Student Loan Repayment Options

Next
Next

Student Loan Consolidation: Comprehensive Guide