Defer Your Student Loans

Flexible Student Loan Repayment Benefit

Deferment of loans, whether through the federal loan program or via private lender, allows borrowers a flexible option in repayment. That said, deferment is awarded to candidates that qualify. Deferment is not used as a consolidation tool or as a way to avoid making loan payments. In fact, if your loans are in repayment trouble you could lose your options to defer unless you act quickly.

A number of deferment options may be available to federal loan borrowers as well as private student loan borrowers. Deferment arrangements may be made under certain circumstances and vary between different types of loans as well as lenders. It’s important that you understand the benefits and limitations of loan deferment.

Deferment of Federal Student Loans

Direct Federal student loans are provided through the federal government. The Federal Family Education Loan Program (FFELP) strikes a unique partnership between student loan lenders and the federal government for the purpose of making government loans more widely available. Federal loans under either program eligible for deferment include:

• Direct and FFEL subsidized Stafford Loans: borrowers may defer both principal and interest while in school.
• Direct and FFEL unsubsidized Stafford Loans: borrowers may defer principal only. You may strike an agreement with your lender that makes deferment of interest possible if you’re willing to pay for the interest capitalization at the end of the period.
• Direct and FFEL PLUS Loans: choose to defer your loan principal. If your FFEL lender offers an option to defer your interest payments you must expect to pay the capitalized interest at the end of the deferment.
• Perkins Loans: borrowers may defer both interest and principal.
• Federal Consolidation Loans may be eligible for deferment.

Deferment arrangements may be made in the following circumstances:

• Students must be enrolled at least half-time in an undergraduate program.
• Students must be graduate fellows.
• Borrowers that have entered repayment but can prove economic hardship may qualify.
• Borrowers unable to find consistent, full-time work may qualify to defer.
• Borrowers in the armed services may defer.

Deferment of Private Student Loans

Private or alternative student loans diverge greatly from their federal counterparts. In fact an alternative loan is a personal loan packaged in a student loan wrapper. Repayment terms vary between private lenders, but some general considerations include:

• Some private loans offer similar benefits to the federal deferment options. You might be exempt from repayment as long as you are in school.
• Private lenders offer flexible repayment terms and attractive consolidation loans to offset repayment problems.
• Deferment of private loans is on a loan-by-loan basis.

Jumping Through the Hoops

Borrowers must apply for loan deferment consideration, much the same way one would apply for a loan consolidation. Deferment is a financial agreement made between a lender and a borrower. A deferment overrides a previous loan agreement. You and your lender will sign a deferment agreement with a specific begin and end date and any attendant terms.

Multiple loan deferments are possible. You are not limited to one deferment if you qualify for another. Similar terms may be applied.

Avoid Default

Default is unnecessary. When you fail to make your loan payments over a particular length of time—for federal loans the limit is 270 days—your loan(s) enter a stage of Default. At this point almost all options to manage your repayment options are suspended until you make a series of on-time payments. The lesson then is: contact your lender as soon as you know you require a hardship deferment or are going back to school.