When he went to college, the plan was to get his degree, find a great job after graduation, and start his fantastic career. Well, things don’t always go as planned, and after less than a year in your dream job, you find yourself on the wrong end of job cuts. It can be challenging to make ends meet while looking for a new job because you have obligations like a car payment and student loans.
The good news is that during this time, it’s possible to temporarily pause your student loan payments until you’re back on your feet. Requesting a student loan deferment or forbearance will not stop interest from accruing, but it will keep your loans current.
What is postponement?
A student loan deferment can be used to postpone your payments temporarily. You may qualify for an unemployment deferment claim while looking for a new full-time job. If you have a subsidized loan, the government pays the interest on your loan during the deferment. If you have a private or unsubsidized loan, you are responsible for the earned good.
Borrowers can also apply for a student loan deferment when they return to school to finish their degree or attend graduate school. Active duty military service, Peace Corps, and disability may also qualify for deferrals.
Review each of your loans carefully to learn about your deferment options. Unpaid interest accruing during the deferment period will be added to the principal balance. That can increase your scheduled monthly payments in the future.
What is patience?
If you don’t qualify for the deferment, you can apply for forbearance. Your loan payments will be temporarily reduced or stopped if you are eligible. The tolerance is usually granted in three to six months, possibly up to a year. During the forbearance, interest will continue to accrue for subsidized, unsubsidized, and private loans. Like deferment, that could result in higher payments in the future.
However, a forbearance period may be the breathing space you need to get back on your feet and resume regular student loan payments. Always contact your loan servicer immediately if you have trouble making your student loan payments.
Is patience or postponement suitable for me?
If you’re going back to school or lost your job, then applying for a deferment or forbearance can help you make ends meet in the short term. But remember, there are limits to how long a deferment or forbearance will last. If you’re not eligible for a deferment or forbearance or have been in them too long, remember that the repayment options you could consider may also reduce payments.
Postponement and patience are short-term solutions. In both situations, you could end up with higher monthly payments because accrued interest is added to your principal loan amount.
When money is tight for borrowers just out of college, it can seem tempting to put a hold on your student loan forgiveness. However, the first thing you should do is look at your monthly expenses. Find out where you can adjust to meet your financial goals.
Do I request a deferment or forbearance?
Depending on whether you have federal or private loans, the process for requesting a deferment or forbearance may be different for each loan. Postponement requests are usually made by phone or in writing. Check with your lenders to understand their guidelines. You may need to submit additional documentation, depending on your reasons for requesting help with your student loan payments.
Will a deferment or forbearance hurt my credit score?
Student loan deferment and forbearance won’t hurt your overall credit score, but they will appear on your credit reports. Your credit score will suffer if you fall behind on your payments before requesting a deferment or forbearance. Remember to keep making payments during the application process.
There is no denying the value of your college education. Studies show that people with college degrees earn more than non-college graduates. Therefore, the benefits of your college degree will outlast the time it may take to pay off your student loans. However, help is available if you find yourself temporarily unable to make your student loan payments.
