Life Happens: What You Need to Know About Deferring Your Student Loans

Student loans: you either love them or you…actually wait – you definitely never love them. As painful as it is to pay huge amounts of money back, they do help fund your education. So for most, they are almost unavoidable. But what happens when you suddenly can’t afford to pay them back?

We like to think that we’ve got it all under control in life and nothing is going to happen, but things do happen. Life is never smooth sailing, and things go wrong. And when those things are as big as losing your job, it can be very stressful.

Luckily, there are options available when it comes to paying back your student loans that we can look at in this article. Let’s get started!

What is Student Loan Deferment?

Have you heard of this before? It can be a complete godsend when you find yourself in a sticky situation. Deferment is just a fancy way of saying that you will be pausing your student loan payments. Don’t get too excited though, as not everybody is eligible, and you should try and pay them back if you are able.

It’s worth noting though that you will still accrue interest if you have an unsubsidized loan. If you have a subsidized loan (e.g. Direct Subsidized Loans, Subsidized Federal Loans, Federal Perkins loans) then you will not accrue interest if your loan payments are paused. It’s not a magic wand that can be waved around and the money problems go away – but it can be used in an emergency situation.

Pros vs Cons of Student Loan Deferment

As with a lot of financial decisions, there are pros and cons for each. We will take a look at them here:

Pros

• If you are having a difficult time, you will be able to get a bit of breathing space and not have to worry about your payments
• Once you meet the requirements for a deferment, you can’t be turned down

Cons

• You may still accrue or have to pay back the interest
• You may end up paying back more over the whole term of the loan
• You may not be eligible for deferment

What’s the Difference Between Deferment and Forbearance?

The main difference between deferment and forbearance is what happens with the interest. As mentioned, when you are in deferment you will not accrue interest if you have a subsidized loan, but you will if you have an unsubsidized loan.  When it comes to forbearance, you can pause your student loans – but you will have to pay the interest that is racking up on them still. 

If you are deferring your loans, you will be able to request this on a 6 monthly basis. You can keep reapplying every 6 months. This is different to forbearance, which is granted in 12 monthly periods, and you are only able to apply 3 times.

When Can You Defer Your Student Loans?

As excited as you may be at the thought of being able to pause your student loan payments, they aren’t available to everyone. You will need to submit a request to your student loan servicer.

In order to be eligible for student loan deferment, you will need to meet one of the following criteria:

• In half-time enrollment in an eligible college or career school
• In an approved graduate fellowship program
• If you are unemployed (up to 3 years)
• Active military duty during a war, military operation or emergency
• Actively serving in the Peace Corps (up to 3 years)
• Facing economic hardship
• In an approved rehabilitation program for the disabled
• If you were on active duty military service in connection with a war, military operation or emergency for the 13 month period after that service, or until you return to college on at least a half-time basis
• If you’re a parent who has received a Direct PLUS Loan or an FFEL PLUS Loan

You will need to meet certain requirements in order to be granted deferment, so it’s worth looking into those.

Alternative Options?

If you are unable to get either deferment, you could try forbearance. You are responsible for interest accrued during forbearance. You could be eligible for a mandatory forbearance, or general forbearance which is given at the discretion of your student loan servicer. There are other options available such as checking that you are on the right payment plan for your loan.

A good one to look into could be an Income-driven repayment plan which bases your payments on your income and family size.

How To Make Your Decision?

When it comes to making your decision, it’s important to look at all of the pros and cons. It might sound like a really good idea to pause your student loans, but make sure you look at the bigger picture.

Do you really want to be paying back more of the loan over the whole term? You may still have to pay interest as well. Make sure you look into all of the options available, including different repayment options.

A good first step to take is to speak to your student loan provider and let them know your situation – they will be able to best advise you on your options.