Is Student Loan Deferment The Right Option For You?

Dreaming of a loan

Students face mounting pressure to find a job that not only keeps them happy but pays enough to cover their student debt. Unfortunately, the student loan industry is plagued with concerning statistics which adds unnecessary stress. For example, data from the Federal Reserve Bank of New York shows 10.8% of student loan holders can’t keep up with the monthly payments.

Data from the Department of Education shows that only 56% of all federal student loan debt is in the process of being repaid. The other 44% is either on hold or even worse, in default. For the many people who fall in this category, taking solace in knowing they aren’t alone is the first step towards relief.

Student Loan Refinance

What Is Student Loan Deferment?

Student loan deferment gives holders of student debt the option to pause payments on their loan or to lower the amount paid for a period of up to three years. During the hiatus period, students holding subsidized government student loans don’t have to worry about interest payments as the government will cover that portion. On the other hand, students will need to pay interest on unsubsidized federal student loans.

Students need to satisfy certain criteria for loan deferment to be a realistic option. Some of the more common criteria include being a recent graduate within the past six months, unable to find full-time employment, or experiencing economic hardship.

Students can defer payments for longer periods of time under more stringent scenarios, typically involving medical and health-related difficulties.

When To Defer A Loan

Anyone who is in a position where they can’t afford to pay anything should consider deferring their payments for as long as possible. Failure to do so could result in student loans becoming delinquent.

The first day after an individual doesn’t make a student loan payment, their loan will become past due. After 90 days, the loan provider could declare the loan as being in default and pass along this status to the major credit bureaus. The simple process of filing for a loan deferment will eliminate this scenario from happening.

Consolidating Loans

Student loan consolidation, as the name implies, consists of combining two or more separate loans into one bundle. It makes paying more simple, as there is only one monthly payment and one set of terms. 

A federal student loan consolidation will group together at least two federal loans into one loan facilitated through the Department of Education. In this case, a student won’t benefit from a lower interest rate, rather they will pay smaller amounts of money on a consistent basis, but over a longer time period.

A private consolidation, commonly referred to as student loan refinancing, consists of a student packaging private and/or federal loans into one new loan. In this case, the student can potentially benefit from lower interest rates.

When To Consolidate A Loan

Students who pay multiple loans throughout the month may find it more advantageous to combine all of their loans into one. The immediate benefit is easier to manage monthly budget, especially if one loan requires payment at the start of the month, another in the middle, and another at the end.

Instead, one simple payment could eliminate worries of not