“Into each life, a little rain must fall.” Sometimes though, it’s a full-blown typhoon.
If tough times fall on you financially, you’ll need to make some hard choices about what to do until the waters recede. If you are in search of options, getting a student loan deferred might be exactly what you need. Here’s what you need to know.
What Is a Deferment?
If you experience financial hardship while repaying a student loan, or would like to go back to school, take an internship, or a residency, you’ll likely qualify to put your payments on hold for a limited period of time. Depending upon the nature of your loan—whether it’s Federal or private—the length of the deferment and the terms under which it will apply can vary.
Federal student loans can be deferred for up to three years in cases of financial hardship. But if you go back to school, the deferment will remain in effect for as long as you’re enrolled in an accredited institution (in most cases).
Sallie Mae loans work a bit differently though. Their terms revert to the repayment plan you selected when you accepted the loan. If you chose to make interest-only or fixed payments while you were in school, then went to a regular payment plan when you graduated, you’ll go back to interest-only or fixed payments under a deferment.
Qualifying circumstances for deferral include:
- Returning to school on at least a half-time basis. Some private loans cap the amount of time being in school will keep you qualified. Sallie Mae loans are also capped—at 48 months.
- Enrollment in a graduate fellowship program or rehabilitation training.
- Unemployment, or working less than 30 hours weekly while seeking a full-time position.
- A temporary period of financial hardship.
- Serving in one of the Armed Forces during a war, military operation, or national emergency.
- Serving in the Peace Corps or AmeriCorps.
What Happens During the Deferment Period?
A deferment places the obligation on hold for a prescribed period. As mentioned above, you’ll make no payments (or minimal payments) on the loan during the deferment period. However, interest will continue to accrue on most types of student loans. Unpaid interest will be added to the amount borrowed when the deferment period ends. As this means your obligation will increase, it’s best to go this route only when you absolutely must.
How to Request A Deferment
Re-enrollment will usually defer your loan automatically—but check with your lender to make sure. In all other instances, the process depends upon the type of deferment you need. Again, the best move is to contact your lender, apprise them of your situation and let them guide you through the process. That way, you’re more assured of remaining in compliance with the terms of the loan. The last thing you want is the lending institution to decide you’re defaulting on the loan when all you’re trying to do is get some breathing room.
If Your Situation is Especially Dire
If you’re behind on your credit cards and other obligations, a student loan deferment is a good place to begin seeking respite. Particularly since most student loans cannot be discharged if you file for bankruptcy protection.
However, before things progress to that point, you can seek relief from credit card and other unsecured debt with a company like Freedom Debt Relief. These organizations can help you negotiate more favorable repayment terms. They can also help with certain private student loans. Before you settle on a debt relief company, research them carefully. Information like these Freedom Debt Relief reviews can help you find a reputable advocate.
You know what they say, “when it rains it pours.” Luckily, there are protective measures you can take to stay dry.