For struggling loan borrowers, getting a deferment or forbearance is a great way to repay student loans. But, like with any decision, there are pros and cons to our choices. Although either a deferment or forbearance enables temporary financial relief and avoids default, it may end up leaving you in a worse position in the long-run. Here are some questions you should consider before getting a deferment or forbearance.
Should I Get a Deferment or Forbearance?
- What is a deferment or forbearance? Deferment or forbearance allow you to temporarily stop making payments or reduce your monthly payment amount for a specified period. During a deferment, you may not be responsible for paying the interest that accrues on certain types of loans, whereas you are responsible for paying the interest that accrues on all types of federal student loans during a forbearance.
- Am I eligible? Eligibility for deferment on federal student loans includes enrollment in a graduate fellowship program, unemployment or inability to find employment for up to three years, and active duty military service, as well as other requirements that you can find on the Federal Student Aid website. If you have a private student loan, eligibility for deferment or forbearance will depend upon your loan service provider. In addition, there are two types of forbearance: general and mandatory. Your loan provider may or may not grant you general forbearance due to the following reasons. These include financial difficulties, medical expenses, and changes in employment. You may be eligible for a mandatory forbearance if you are attending a medical residency, serving in an AmeriCorps position, or performing teaching services that would qualify your for teacher loan forgiveness.
- How do I request one? You will need to submit a form to your student loan provider. For most deferments and some types of forbearance, you must also provide your student loan provider with documentation showing that you meet the requirements. For instance, review the General Forbearance Request form too see if you are eligible under these types of loans. Also, if you’re enrolled in an eligible college or career school part-time, your loan will automatically be placed into deferment. Your loan servicer will then notify you that the deferment has been granted.
- Is it right for me? If you’re having trouble making ends meet because of a temporary situation, deferment or forbearance is probably the right choice for you. However, if you don’t foresee your financial circumstances getting better any time soon, then you may want to consider an income-based repayment plan or alternative repayment option, like consolidating student loans.
There you have it; the difference between a deferment and forbearance, eligibility guidelines, and how to request a loan postponement. Remember, a forbearance should be a last resort, and you should always see if you qualify for a deferment first. If possible, make the appropriate cuts to your budget and take out any unnecessary expenses to help you save money. If you need more information, check out our Deferment, Forbearance, and Student Loan Forgiveness video.