College loans are difficult to deal with. They are usually very expensive, the interest rate is high and students don’t have well-paying jobs that can help them pay off everything. This situation is where the student loan deferment comes in. It’s essentially a break your lender allows you to take from paying back the money you owe. How and when do you qualify for a deferment and what are the ways in which you can ask for one? These are the questions we are attempting to answer.
What Exactly Is Deferment?
Simply put, the student loan deferment is a postponement or a break from you having to pay your monthly installments towards the bank or financial institution that loaned you the money. It creates time for you to get back on your feet so that you are able to resume paying your debt. However, you should be attentive to the terms of your deferment and be very well aware of the fact that it doesn’t erase any of the debt itself, nor will it in the future.
Most institutions that grant loans will ask for you to fill out a deferment form. Be careful how you complete it. Verify that all the information is accurate and genuine because they will check it out.
Another thing you need to know is that, even though you will not be making any payments during your student loan deferment time, you will be held responsible for all the interest that gathers in time over your loan. This responsibility, however, may not be generalized for all banks and loaners, so make sure to talk to them about this.
When your student loan deferment time ends, all the interest you have accrued and not paid will be added to the original sum of money you owe. The process is called ‘capitalization’, yet another point to discuss with the bank representative prior to asking for a deferment. Evidently, capitalization will increase the sum you have to pay. Therefore, one solution to avoiding this would be to keep on paying interest even during your student loan deferment period. It should be a small amount every month so that you don’t feel burdened or that you’re defeating the purpose.
What Types of Student Loan Deferment Are There?
To be able to qualify for a student loan deferment, you must meet a set of criteria. More specifically, there are certain situations in which a delay applies and you must make sure you fit in one of them.
- The Armed Forces student loan deferment
You are eligible for a deferment if you are on active military service in the National Guard or the Armed Forces. Remember the stress here is on active. You have to be in action during a crisis, attack, war, a national emergency or any other kind of military operation that requires your presence.
This deferment has a limited period, though, which you need to discuss with your loaner. On average, they offer up to 36 months’ student loan deferment in this case, including any time you spend with the Public Health Services or the National Oceanic and Atmospheric Administration.
- The domestic volunteer student loan deferment
This type stipulates that if you are a paid volunteer, full-time employed in an ACTION program, you are eligible to receive a deferment. However, you must first serve at least one year before applying.
- The economic hardship student loan deferment
Another reason why you may request deferment is if you find yourself below the poverty line. In other words, if you make less than the legal minimum wage, if you are under the poverty guideline or are on Public Assistance, your loaner will agree to give you some time to get back on your feet.
What you need to remember concerning this type of deferment is that you do need to be employed to apply. The criterion says you must earn a monthly salary, only that it has to be lower than minimum wage and not sufficient to support you or your family.
- The full-time teacher in a shortage area student loan deferment
This category of suspension is pretty self-explanatory. If you are a teacher and currently performing your duties in a shortage area, you qualify for a deferment. However, keep in mind you need to be a full-time teacher.
- The graduate fellowship student loan deferment
The good news is that most loaners do not ask for a time limit as per this kind of postponement. Still, do not generalize this and discuss terms with your loaner. You may be granted this postponement if you are accepted into a fellowship program for graduates or if you are an undergraduate but are studying full-time in a graduate fellowship program.
- The parental leave student loan deferment
Your payments can be deferred for a while if you are pregnant, taking care of a newborn or if you have just adopted a child. Be careful on how you plan your finances, because most lenders only agree to an average of six months when it comes to this deferment.
- The rehabilitation training student loan deferment
If you are admitted to one of these programs, you may apply for a deferment. The program needs to be approved by the Department of Veterans Affairs, and you have to be following it full-time. The programs may include these situations.
- Disabled people
- Vocational rehabilitation
- Drug addiction
- Alcohol abuse.
- The temporary total disability student loan deferment
Your lender will agree to a delay if you find yourself unable to work or go to school due to an injury or illness. The period of your inability needs to be at least 60 days for you to qualify for said deferment. They also grant this type of postponement to people who are not ill themselves but have to care for at least 90 days for a very sick member of their immediate family. This individual needs to be someone who is dependent on you or a spouse.
- The unemployment student loan deferment
Another reason why your lender will allow for a delay is if you are unemployed and have no income to support yourself or your family and to pay your monthly installments. The one thing you must bear in mind concerning this is that you have to be actively looking for a job the entire time you are in deferment. You must also make proof of the fact that you have been looking for a job prior to applying for said deferment, but that you were unsuccessful.
You must prove you were looking for a full-time job, which, in the United States, is described as requiring at least 30 hours of work per week. Also, you need to keep the position for at least three months.
It may seem downright impossible, at times, to keep up with the installments you have to pay for your loan. Students, in particular, are notorious for having a hard time doing it, since their income is low and they don’t have a lot of working experience. Therefore, they might not be able to keep on track. The student loan deferment will give you a well-deserved resting point from all that, as long as you qualify.