Is a Deferment Better than a Forbearance?
You may have heard of a deferment and you may have a vague idea what it is. But what happens to your loans while they are in a deferment?
If you’re a student loan borrower, there is a lot of information out there that can be overwhelming and it can be hard to keep all the information straight. Maybe you’ve heard some terms but don’t remember what it is or how it applies to you. You may have heard of a deferment and you may have a vague idea what it is. But what happens to your loans while they are in a deferment?
A deferment is a period of time in which repayment of your principal loan balance and interest of your loans are temporarily delayed. So, unlike a forbearance, your loans do not accrue interest while in deferment. The government, depending on what type of loans you carry, will actually take care of the interest for you. The government will pay interest on Federal Perkins Loans, Direct Subsidized loans, and/or Subsidized Federal Stafford Loans. They do not pay interest on any unsubsidized Forbearance loans or and PLUS loans. The borrower is responsible for paying the interest that accumulates during the deferment period. However, your payment will not be due during the period.
Some reasons you might find yourself eligible for deferment might be:
- In-school deferments for at least half-time study
- Graduate fellowship deferments
- Economic hardship deferment granted one year at a time for a maximum of three years
- Unemployment deferment not to exceed three years
- Military deferment
- Rehabilitation training program deferment
Finding out if you’re eligible for a deferment can be tough to figure out. There is a chart on the Department of Education’s website that can provide more in-depth look at eligibility.
Most of the deferments offered are not automatic. For the most part, you will need to request that your loans are put into a deferment with your loan servicer. If you’re attending school at least half-time or more you must contact your financial aid office and loan servicer for an in-school deferment. If you hold Perkins Loans you will contact the school, you were attending when you received that loan. For Direct and FFEL Loans you will contact your loan servicer.
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