College graduates emerge with debt that proves cumbersome, especially at first, when employment prospects are entry-level. Flexible repayment programs and other accommodations, like deferment, forbearance and built-in grace periods provide relief for student borrowers when they need it most, protecting them from repayment defaults and other unsavory credit consequences.
Loan deferment programs allows borrowers to delay loan repayment for a specified term, providing practical solutions for a number of irregular repayment situations. Loan deferment is a viable option:
- When you return to school, or undertake medical residency or internship
- If you become unemployed, disabled, or experience a period of economic hardship
- While you’re pregnant, or caring for a newborn or have just adopted a child
- If you’re a teacher in a high-need area
- If you work in public service
College students with limited credit need to protect it at all costs, so defaulting on student loans is never an option. Use flexible repayment strategies, offered by the Federal Government, to satisfy your student loan obligations. And if you are unable to pay, address the issue head-on, before your account is in arrears.
Federal Consolidation Loans provide another alternative for heading off repayment difficulties. The program allows borrowers holding more than one student loan to group them together, into a single loan. The results, for some fortunate borrowers, are manageable repayment plans that often carry lower interest rates than the original loans.
In-School Deferment: A Popular Choice
Attend school at least half-time, as an undergraduate or graduate student, and you are eligible for student loan deferment on federal loans and private student loans. Deferment options include opportunities to put your Stafford, Perkins and PLUS loan payments on hold, and you can defer loan interest and principal. If your federal loan is subsidized, the Department of Education pays your student loan interest while you are in school. For private loans, you may opt to defer interest and principal, or to pay interest and defer principal only.
Graduate students engaged in fellowship programs often qualify for similar in-school deferments. Contact your financial aid office for information about delaying interest and principal payments on your post-secondary education loans.
Unemployment Deferment and Economic Hardship
If you become entirely unemployed or your work hours fall below 30 per week, you may be eligible to request an Unemployed Deferment from your lender. Re-apply every 6 months, if you qualify, but be prepared to prove you are taking steps toward regaining full-time employment.
Prove income below the annual poverty level or he said meet lender hardship requirements for debt-to-income ratio, and you may qualify for Economic Hardship Deferment. Qualified individuals may reapply for up to three years
Medical residents sometimes qualify for the economic hardship deferment. New residents and interns carry high student loan debt, versus low-incomes earned completing these phases of medical education. As a result, even would-be doctors often meet the requirements for this deferment option.
Teacher Loan Deferment Options
Certain professions are experiencing shortages of qualified personnel, so recruiting efforts are in-place to stimulate enrollment is certain academic programs. Teachers, in particular, benefit from loan forgiveness and deferment programs designed to encourage them to earn degrees and teaching credentials.
Federal Teacher Loan Forgiveness is mimicked by State Governments across the country, providing deferment and forgiveness for students willing to trade financial assistance for service in high needs areas. Working in state designated facilities, and teaching specific scholastic subjects, like math and science, earns several thousand dollars annually, for program participants.
How to Defer Your Loans if You Work in Public Service or the Military
Public Service, volunteer work, and military service open doors for deferment, in some cases. Federal student loan repayment for outstanding balances on loans borrowed prior to July 1, 1993 are eligible for deferment for staffers at eligible organizations like:
- Peace Corps
- US Armed Forces
- National Oceanic & Atmospheric Administration (NOAA)
- Certain Tax Exempt Organizations Deemed Acceptable by Dept. of Education
- Officer of the Commissioned Corps of Public Health of U.S.
Members of the United States Armed Forces are eligible for student loan deferment during national emergencies, active duty-service during wartime, and while engaged in other military operations. Special accommodations are also made during the 13 months following an active duty soldier’s service, when repayment is not required.