Understanding Student Debt Deferment, Forbearance and Consolidation

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Sometimes, deferment and forbearance are confused and taken as synonyms. Truth is that they are not and the differences, though subtle are essential. Understanding how debt deferment, forbearance and ultimately student debt consolidation work, will help you overcome any debt problem that you may run into when trying to keep up with your student debt payments. Deferment And Forbearance Often mistaken, deferment and forbearance are two separate concepts. While deferment is a regulated right which the borrower is entitled to, forbearance is a prerogative of the lender which can grant it or not. Both concepts imply the postponement of the debt repayment. However, they differ as regards to the one who is entitled to decide it.Deferment is a regulated right because the rule states that if requested by the borrower and provided that the necessary requirements are met, the lender must grant it. This implies that the borrower can request a deferment according to the stipulations of the loan contract whenever he wants and the lender is obliged to postpone the collection of the loan’s monthly payments.Forbearance is, on the other hand, a choice that the lender has to postpone the repayment of the loan if requested by the borrower. However, he is not obliged to do so by regulations and it is really up to him whether the postponement is opportune or not. Thus, there are no particular requirements that you need to meet in order to obtain forbearance because it’s a lender’s arbitrary decision whether to grant it or not.Postponement Type Requests Grants Deferment The Borrower Automatically (If Requirements Are Met)
Forbearance The Borrower Lender (At His Sole Discretion)Student Debt Consolidation When you just can’t achieve the results you seek by merely postponing repayment, you have to consider consolidating your student debt. Depending on which type of student debt you hold, you’ll have different options available.Most students and graduates have a combination of both federal student loans and private student loans or private personal loans and lines of credit that where used for college spending. These debts need to be consolidated separately.Federal student debt can be consolidated through federal student consolidation loans which lock the interest (with a subsidized rate) and offer longer repayment programs that can be extended by up to 20 years or more. That way, you get to reduce the amount of your monthly payments considerably.As regards to private debt, debt consolidation is also available. However, private student debt consolidation can consist on negotiations with your creditors made by expert mediators who can obtain up to 60% debt reduction and new repayment schedules to suit your needs or, alternatively, private student debt can also be consolidated by means of a debt consolidation loan which works in similar terms as federal student consolidation loans only that the interest rate is not subsidized.