Apply Now

How Do Student Loan Deferments Work?

Posted on

After trying to decrease your auto payments, a student loan deferment may be another option to increase financial breathing room. Student loan deferments, designed to provide financial relief, allow a temporary pause or monthly payment reduction. Federal student loans and private loans are available for loan deferments; however, rules and requirements vary depending on the loan type and lender.

How Do Student Loan Deferments Work?

Federal Student Loan Deferment

Federal student loans, issued by the U.S. Department of Education, offer subsidized and unsubsidized loans, which determine how interest will be affected post-deferment.

Interest
Direct unsubsidized loans begin to accrue interest when taken out and continue to accrue throughout a deferment period. The U.S. government may pay the interest on direct subsidized loans during the deferment.

Deferment Period
Borrowers may be granted loan deferments for up to three years; however, reapplication is required every six or 12 months. During the deferment, there are no late fees, and your credit score won’t be affected.

Request a Deferment
The deferment application process varies based on the loan type. You may be eligible for a deferment if you fall under one of the eight types of requests, such as economic hardship, school enrollment, and military service. Contact your loan servicer directly to inquire about eligibility requirements and the request process.

Private Student Loan Deferment

Private student loans are issued by banks, credit unions, and online lenders. It’s not required for private lenders to provide loan deferment options, as there is no standardized student loan deferment requirement for private loans. Certain private lenders offer payment relief options depending on their rules and requirements

Interest
Private student loans often have high-interest rates. With private loan deferment, interest on your loan will likely accrue and capitalize at the end of the deferment period, leaving the borrower with an increased loan balance and higher payments.

Deferment Period
The deferment duration on private student loans varies by lender. Sallie Mae, a popular private lender, allows a 12-month deferment with renewal opportunities for certain borrowers.

Request a Deferment
Private lenders require a loan deferment application. Borrowers need to contact their lenders directly for deferment options and application requirements.

Next Steps

If you’re concerned about making your student loan payments, student loan deferment may be an option for you. Once you have applied for a loan deferment, be sure to avoid becoming delinquent on your loans and negatively affecting your credit score by continuing your payment schedule until your loan servicer confirms your request.

Gravity Lending is a fintech company dedicated to improving our customers’ lives one payment at a time. We provide the knowledge, assistance, and tools to help you meet your financial goals. Contact us today—Gravity Lending is offering loan refinancing until the end of the year.