How to Defer Student Debt When Going Back to School
At a Glance
- If you go back to school, you may have the option to defer your student loan payments with the lender’s permission.
- Deferment temporarily stops payments, reduces the financial burden, and may prevent interest from growing on certain federal
- Alternatives to deferment include refinancing, altering payment plans, or seeking forbearance, each with its own considerations and eligibility criteria.
Getting a new qualification can boost your career and earning potential, or it can create a path for you to enter a new career field entirely. Read on to learn how to defer student
Loans Stop When You Go Back to School?
It is important to understand what happens to your student
Not everyone has the option to defer their student loan payments; it depends on the type of loan you have. So, it is as important to understand if you can defer as it is to know how to defer student
What is Student Loan Deferment?
Student loan deferment is the process of temporarily stopping your student loan payments with the lender’s permission. The permission is the most important part. If you stop paying without the lender’s permission, that is called being in default. Defaulting is very bad for your finances and credit score.
Not all student
The deferment period lasts as long as your program if your enrolment remains on a half-time or full-time basis.
If you decide to get a student loan deferment, contact your lender and find out the following details:
- if your loan is eligible for deferment
- if the educational institution and program you want to enroll in qualifies for deferment
- if the interest on your
loanscontinues to grow while deferred
- your lender’s procedure for student loan deferment.
Pros and Cons of Student Loan Deferment
Student loan deferment is a good choice for some situations, but it is not guaranteed a good idea for everyone. In this section, some of the benefits and disadvantages of deferment are outlined.
- No payments: Deferring reduces the financial burden of going back to school. This is especially true because you have to be enrolled on a half-time or full-time basis, so your monthly earnings are likely to be much lower or zero.
- Interest break: For a special kind of federal student loan, your loan interest will not grow over the period that it is deferred. That means you won’t owe more money after the deferment than you did before. This kind of loan is called a subsidized loan or Perkins loan. Perkins
loansare subsidized by the Department of Education.
- Benefits: Deferring a federal loan means you still get all the benefits of a federal loan. This includes the possibility of federal loan forgiveness programs and other benefits.
- Extra time: Deferring your student loan does not decrease the total number of years it will take you to pay it all off. The payments you don’t have to make essentially get added to the end of your loan for later.
- Growing interest: Depending on the type of loan you have, deferment might not stop the interest on your loan from growing. If you have an unsubsidized federal loan, the balance due will grow while you are studying, so you will owe more after the deferment than you did before, even if you did not take out a new study loan to go back to school.
Alternatives to Deferment
If you want to go back to school but you have student loan debt, deferment is not your only option. Some of the other strategies you could use to deal with your student loan are outlined below.
Refinancing means taking out a new loan (e.g. loans for international students) to pay off an old loan. If the interest rate on your new loan is lower than the old one, your payments will be lower (or you can pay it off faster).
Refinancing could be an option if you have federal student
As a working adult, you may be able to get a lower interest rate or better terms than you got for your student
You can only refinance student loans with private lenders, whether your original
Altering Your Payment Plan
If you have a federal student loan (subsidized or unsubsidized) can apply for a special payment plan adjusted to how much you earn, called an income-driven repayment (IDR) plan. IDR plans are only available for federal student
Even if you have private student
It is important to understand that reduced payments do not affect the total balance due. If you can get lower payments, that doesn’t mean you owe less. It means you are only required to pay a smaller portion of what you owe per month.
In the long term, the result is that you will take a longer time to pay off the loan. Since the interest on the outstanding balance continues to grow over that extra time, the total amount you pay back is also higher.
However, this makes sense if you cannot afford to make the payments in the short term. It might be better to stretch the loan out and pay more in the long term than default on the higher payments in the short term and damage your credit score.
Forbearance is similar to deferment. It is when the lender is willing to let you temporarily stop making payments on your loan. However, unlike deferment, the interest on your outstanding balance continues to grow while it is under forbearance for every type of student loan.
You can apply for forbearance with your lender if:
- you have a federal loan but you don’t qualify for an automatic deferment
- you have a private loan and you have lost the ability to make payments because of injury, serious illness, or other events
Federal student loan forbearance usually lasts for up to 12 months at a time. Contact your lender to find out whether you are eligible for student loan forbearance and how to apply if you are.
Note: A number of student loan borrowers utilized forbearance during the COVID-19 pandemic to defer payments while the economy was down and unemployment was up. For some Coronavirus forbearance was incorrectly reported by student loan services, leading to negative impacts on credit scores. If this happened to you, check out our guide on how to fight back.
Frequently Asked Questions (FAQ)
Can I defer my student
loans if I go back to school?
Yes, you can generally defer federal student
How do I defer my student
loans for going back to school?
To defer your student
- Contact your loan servicer.
- Provide proof of enrollment in an eligible school, typically at least half-time.
- Complete any necessary deferment request forms your servicer requires.
Does going back to school defer all types of student
Going back to school can defer most federal student
Will interest accrue on my student
loans during deferment?
Interest may continue to accrue on unsubsidized federal student
How long can I defer my student
loans while in school?
You can usually defer your student
What happens after the deferment period ends?
Once your deferment period ends, you will need to start making payments again. Your loan servicer should notify you when your payments are scheduled to resume.
Can I defer student
loans if I attend school part-time?
Yes, you can generally defer federal student
Does deferment affect my eligibility for loan forgiveness programs?
Deferment usually does not affect your eligibility for loan forgiveness programs. However, periods of deferment may not count toward the required payment periods for certain forgiveness programs.
What if I can’t afford my payments after my deferment ends?
If you can’t afford your payments when your deferment ends, you may be eligible for other repayment plans, such as income-driven repayment plans, which can offer more manageable payment amounts.
Should I continue making payments on my
loans even if they’re deferred?
If you can afford it, continuing to make payments on your student
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The procedure for how to defer student