Know what student loan deferment means? In case you just started with financial aid, I’m going to tell you a little about it to help you stay out of trouble. When you need to use it, you need to understand the benefits you have.Let’s run through it so you have some specifics.1. What does student loan deferment mean?Deferment starts with the name. You can defer, or postpone until later, some payments on these loans. This can help in some important circumstances.In a true deferment, your interest will also stop.2. What loans allow deferment?Great question with a great answer. Stafford loans, Perkins loans, PLUS loans, and some private student loans.But here’s a key to know about your loan. Subsidized Stafford loans and Perkins loans typically defer completely.Unsubsidized Stafford loans, private student loans from a bank not part of your government approved financial aid, and PLUS loans don’t defer completely.In the case of the PLUS loans and unsubsidized Stafford loans, you can defer the loan but you will still have to pay interest – only the principal will be deferred. If you don’t pay the interest, it is capitalized.In other words, added to the loan. After that, you will pay interest on the original balance and on the added interest.For a private student loan, you’ll have to check with your lender, but many offer some form of deferment similar to the PLUS loan.3. When can you defer a loan?In my case, I used student loan deferment to go back to graduate school. This worked great. As long as I was registered and going to school at least half time, I didn’t have to pay my loans.I have also used it once when I couldn’t find work. That really helped.You can also use it during Peace Corps service, and graduate fellowship programs or rehab programs for the disabled. Also, you can use deferment during military service.4. How do you start a deferment?It’s not hard. Call your lender and ask for the form. Usually, you can print the form online and maybe even sign it there.If you have a legitimate reason, your lender will let you know that your loans have been deferred.5. How long does deferment last?In my case, I used student loan deferment for my whole graduate degree, or about 3 years. That really helped, since I was unemployed much of the first year.If you use it while you look for a new job, you can defer payments for 3 years in the federal program. Your lender may have different rules for your private loan, so be sure to ask.6. What’s the difference between deferment and forbearance?Deferment and forbearance essentially accomplish the same task: turning off your loan payments for while.Deferment usually doesn’t increase the value of your loan. Forbearance means that your lender doesn’t collect your payments, but still charges you interest in most cases.A deferment may cost nothing or just interest payments.A forbearance will typically cost at least the interest tacked onto the end of the loan. Also, forbearance applies when you don’t qualify for deferment.7. Can I use student loan deferment after consolidation?Yes! If you have consolidated through the federal consolidation program, you still have benefits.Private student loans may not have the same benefits, so check into it with your lender.Keep It StraightThere you have it. 7 things to keep straight about deferment. Remember, federal student loans can be great, but they do lack one thing. You can’t escape through bankruptcy.Be careful to only borrow what you need and can pay back. Whether you borrow through the federal financial aid program or a private lender, keep your lending low and you’ll be able to pay it off faster, and don’t borrow when you don’t need it.Good luck!
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.
There are three possible ways to reduce your student loan payments, provided you are making monthly payments to the U. S. Department of Education student loan programs. This article will focus on the “General Forbearance” as the main tool to reduce your student loan payments.1. You Can Request A Forbearance.2. You Can Request Student Loan Consolidation.3. You Can Change Your Student Loan Repayment Plan.Types Of Forbearance:Having trouble making those student loan payments? You may qualify for a student loan forbearance. A lot of people think that you either have to be in the military or be completely financially destitute to qualify for a student loan forbearance. Not True! ANYONE with trouble making the payments may qualify for a “General Forbearance,” provided your student loans are held and managed by the U. S. Department of Education.Listed below are the four types of forbearance options and their requirements.General Forbearance: This forbearance allows you to postpone or reduce the amount of your monthly payment for a limited and specific period of time.I will also note here that the “General Forbearance” allows to you to skip all payments for one year and may be annually renewable for as long as you qualify. You can also use the “General Forbearance” to simply reduce your payment. You can cut your payment in half, if you so choose.Americorps (CNCS) Forbearance: This forbearance allows you to stop payments temporarily if you are serving in an approved national service position. The forbearance form must be certified by the Corporation for National Community Service (CNCS).Internship/Residency Forbearance: This forbearance allows you to postpone or reduce the amount of your monthly payment for a limited and specific period of time if you have been accepted into an Internship/Residency Program.Loan Debt Burden Forbearance: This forbearance allows you to postpone or reduce the amount of your monthly payment for a limited and specific period of time if you provide acceptable documentation showing that your monthly payments for eligible education loan(s) exceed 20% of your total monthly gross income.Teacher Loan Forgiveness Forbearance: This forbearance allows you to postpone your monthly payment for a limited and specific period of time while you are performing qualifying teaching service as a teacher in an eligible elementary or secondary school.If you write your monthly checks to the U. S. Department of Education, you may apply for a “General Forbearance” at: http://www.dlssonline.comStudent Loan Consolidation:You can also go to the same site to have you your student loans consolidated, provided you have U.S. Federally Subsidized loans and you are currently making your payments to the U.S. Department of Education.The interest rate for a Direct Consolidation Loan, is the weighted average of the interest rates on the loans being consolidated rounded to the nearest higher one-eighth of one percent. As of this writing, the current rate is somewhere around 6%.Student loan consolidation can be very tricky, therefore I suggest you call the consolidation hotline 1-800-557-7392, to estimate your weighted average interest rate and to see what your loan payments might be.Change Your Student Loan Repayment Plan:If a forbearance or loan consolidation is not for you, you can always choose to select a “Graduated Repayment Plan” which can also be very low for the first couple of years. Either way, you don’t have to starve to death to make those payments. Once you have your PIN number, you can simply go here: http://www.ed.gov/DirectLoan… and you can change your payment option to “Graduated Loan Repayment Plan” to get the lowest possible monthly payments. That’s all there is too it!