Although federal student loan deferments don't require interest to be paid during the deferment period, there are still some exceptions.
Not exact matches
While payments
do matter (more on that in a second), having
loans in
deferment doesn't.
This is an extremely important strategy, particularly since interest
does not accrue for subsidized
loans during
deferment periods.
If you
do not make any payments on your federal student
loans for 270 - 360 days and
do not make special arrangements with your lender to get a
deferment or forbearance, your
loans will be in default.
Unlike federal student
loans, your private (non-federal)
loans don't have a common set of consumer protections when it comes to
deferment and forbearance.
Before moving forward with any kind of
loan deferment, you should be aware of the pros and cons of
doing so.
Private
loans do not offer the same range of repayment options, such as
deferment, forbearance, and income - based repayment.
During a
deferment period, your
loan balance on subsidized
loans does not accrue interest; you will however accrue interest on any unsubsidized federal
loans.
For those under extreme financial constraints, a «forbearance» during residency is still possible, but
loans, which
did not formerly accrue interest during
deferment, now begin accruing interest immediately upon graduation.
But during
deferment period, certain types of student
loans will not accrue interest while some will
do.
Another disadvantage might be that private student
loans don't have
deferment options like federal student
loans do.
The difference is you don't have to pay interest on specific types of
loans throughout the
deferment period.
With private student
loans, many lenders don't offer forbearance or
deferment for financial hardship.
Note: having student
loans in
deferment do not count.
Don't make any moves before reading this FREE guide: 10 Things You Should Know About Student
Loan Deferment and Forbearance in 2018 Find out which option is best for you and how to apply for the right one the right way.
Paying your
loans immediately is always a better option, but if you are unable to
do so,
deferment is there to help.
Deferment is a better option than forbearance because interest
does not accrue, as long as your
loans are subsidized; that can save you money when it comes time to start making payments again.
Why
do so many student
loan borrowers end up in default on their student
loans when their circumstances would have allowed them to qualify for a
deferment?
If you have a subsidized
loan, interest
does not accrue during
deferment.
Not only
do you qualify for
deferment, but you can also have portions of your
loan forgiven all together.
Deferment and forbearance are great options if you have no financial means at the time you enter repayment on your student
loans, but don't use them as a way to just delay paying them.
Private
loans usually don't offer income - driven repayment plans, but they may have
deferment or forbearance options available.
If you don't, the interest will capitalize leading to higher student
loan debt and higher monthly payments once your
deferment or forbearance expires.
In this type of Direct Stafford
Loan, students don't pay interest on their
loans while in school at least half time, during grace period or a period of
deferment.
Loans in
deferment or forbearance
do not count towards the 120 payments.
Meanwhile, forbearance is the next option if you don't qualify for a
loan deferment.
The federal
loan programs allowed me to defer the
loan payments for a few months, but my private education
loan through Wells Fargo
did not offer a
deferment program or any other alternative payment method for this difficult time, and charged my
loan off when it was 91 days late as per the contract I signed when I was 19 years old.
If you
do not request a
deferment or forbearance and instead make payments under an income - driven plan during your Peace Corps or AmeriCorps service, you could possibly receive credit for a larger number of qualifying PSLF payments than you would if you received a
deferment or forbearance and then used your Peace Corps transition payment or Segal Education Award to make a lump - sum payment on your Direct
Loans.
About 11.5 % of student
loan balances are 90 + days delinquent or in default and that figure is often reported low because it
does not include student
loans in
deferment or forbearance and the reason the
loans are in that status is because people can't afford them.
The time you spend in the Peace Corp will count only if you 1)
do not choose to get an economic hardship
deferment and make scheduled payments during your service or 2) make a lump sum payment on your
loan from the Peace Corps transition allowance no later than six months after you receive the allowance.
Deferments and
loan forgiveness don't count and won't count against your credit score.
Yet, it also means giving you a good plan to manage your
loan payments and make sure you
do not enter default or
deferment.
Also, we found that 40.76 % of parents believe that unsubsidized student
loans do not accumulate interest during periods of
deferment (this is false).
Deferment doesn't really
do anything except delay the inevitable — the time when you have to start repaying the
loan.
Although you don't have to repay a
loan while it's in
deferment, interest usually continues to accrue on the money you owe.
The main difference between the two is that in
deferment, your student
loans usually
do not accrue interest.
In addition to typically carrying higher interest rates, they don't come with the same protections that federal
loans do (like income - based repayment plans, forgiveness options, and
deferment / forbearance options).
97.90 percent of students surveyed
do not know which
loans accumulate interest in - school or during
deferment
Subsidized
loans don't accrue interest while you are in school and at any point that your
loans are in
deferment; unsubsidized
loans do accrue interest during these times.
Forbearance is another option to delay payments on your federal
loans if you don't qualify for
deferment.
In short, subsidized
loans don't accrue interest while you are enrolled as a student or at any point that your
loans are in
deferment.
If you
do place your unsubsidized
loan into
deferment, the interest that accrues, especially if it capitalizes, can easily add thousands of dollars to your balance.
You can also
do this by trying your best to not place unsubsidized
loans into
deferment.
Student
Loan Fast Facts: We talked about the difference between subsidized and unsubsidized student
loans above, but just to recap: Subsidized student
loans come with a special benefit in that they don't accrue interest when they are placed in
deferment, while unsubsidized
loans do accrue interest during this time.
But if you plan to refinance your federal student
loans, it must be
done with caution as you tend to lose some benefits that usually associate with some of them such as
loans forgiveness,
deferment, forbearance and flexible repayment plans such as early repayment and income based repayment programs.
Unlike many other companies, Wells Fargo
does not permit
deferments on student
loans.
This
loan has one additional benefit, which is that students can request
loan deferment during their residency provided that it
does not exceed ten years of
deferment, including the grace period.
The advantage to
deferments is that interest
does not accrue on subsidized
loans while you are in a qualified
deferment period.
Wells Fargo
does not permit
deferment of student
loans or interest - only payments.
If you have difficulty making your scheduled
loan payments, but you don't qualify for a
deferment, your
loan servicer (s) may be able to grant you a forbearance.