Loan Deferment Explained: Understanding Student Loan Repayment Options
When it comes to navigating the complexities of student loan repayment, understanding your options is crucial. One such option is loan deferment, a temporary postponement of federal student loan payments. In this article, we'll explore the ins and outs of loan deferment, its eligibility requirements, and how it can help you manage your student loan debt effectively.
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What is Loan Deferment?
Loan deferment is a period during which borrowers are allowed to temporarily postpone their federal student loan payments. This financial relief option is particularly helpful for individuals facing financial hardships or those pursuing higher education. One of the main advantages of deferment is that interest does not accrue on subsidized loans, such as Direct Subsidized Loans and Federal Perkins Loans, during the deferment period. However, interest will continue to accrue on unsubsidized loans, such as Direct Unsubsidized Loans and Direct PLUS Loans.
Eligibility Requirements for Loan Deferment
To qualify for loan deferment, borrowers must meet specific eligibility criteria. Some common reasons for deferment include:
Enrollment in an approved graduate fellowship program or an approved rehabilitation training program for disabled individuals
Unemployment or inability to find full-time employment (up to three years)
Economic hardship, including Peace Corps service (up to three years)
Active duty military service or post-active duty deferment (varies by service type)
Enrollment in an eligible college or career school at least half-time
How to Apply for Loan Deferment
To apply for loan deferment, borrowers should contact their loan servicer and provide the necessary documentation to support their request. This may include proof of enrollment in an eligible program, proof of unemployment, or military orders. It's essential to continue making payments until the deferment has been granted to avoid delinquency or default.
Pros & Cons of Loan Deferment
Loan deferment can be a helpful tool for managing your student loan payments. However, it's important 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
Extended repayment period, potentially increasing the total amount paid
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Loan deferment is a valuable option for borrowers who need temporary relief from their student loan payments. By understanding the eligibility requirements and how it impacts your loan balance, you can make informed decisions about your financial future. Remember to explore other repayment options, such as income-driven repayment plans or loan forgiveness programs, to find the best solution for your unique circumstances.
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.