If you graduated in May with federal Stafford student loans, you may be facing the prospect of adjusting your budget to accommodate new monthly student loan payments as your six-month grace periods end sometime this month. If you’re still doing temp work, looking for a job, or if you just got stuck with a lower-than-expected entry-level salary, it’s entirely possible that you’re not sure how you’re going to come up with the money you’re going to need each month to a meet a new monthly expense from student loans going into repayment.
The main thing is don’t be embarrassed! A lot of student loan borrowers go through periods when they’re having trouble making their student loan payments. Your federal student loans come with deferment and forbearance benefits that can help you through those times when money’s a little short.
If you’re a recent graduate—or any parent or student loan borrower—who’s having trouble making your student loan payments each month, NextStudent, a leading Phoenix-based education funding company, urges you to contact your lenders about your deferment and forbearance options, which allow you to temporarily reduce or postpone your student loan payments without compromising your credit score or defaulting on you student loans.
Deferment
Deferment allows you to temporarily stop making payments on your student loans. If you’re unemployed or experiencing economic hardship, you may be able to request a deferment, for up to a year at a time, up to a total of three years over the life of the student loan. You must contact your lender to request an unemployment or hardship deferment, and you may need to complete a deferment request form.
Forbearance
If you’re unemployed or experiencing economic hardship, you may be able to request a forbearance, which allows you to temporarily reduce or postpone payments on your student loans. You must contact your lender to request a hardship forbearance, and you typically need to complete a forbearance request form. You may also need to submit supporting documentation, depending on the nature of your request.
Generally, a lender can grant a forbearance for up to a year at a time. Unlike unemployment or economic hardship deferments, there is no three-year cumulative limit on discretionary forbearance periods granted due to financial hardship.
Interest Charges on Student Loans in Deferment or Forbearance
Interest charges continue to accrue on your student loans even while they’re in a deferment or forbearance period. The government will pay the interest on any subsidized student loans (such as Perkins or subsidized Stafford loans) that you have in deferment, but you’ll be responsible for the interest on your unsubsidized student loans (such as Grad PLUS or unsubsidized Stafford loans) that are in deferment and on any student loans, whether subsidized or unsubsidized, that are in forbearance.
Any unpaid interest that accrues during a deferment or forbearance period will be capitalized and added to your principal student loan balance for you to repay once repayment resumes. To avoid having accrued interest added to your principal student loan balance, you can always choose to make interest payments during deferment or forbearance periods in which your payments are postponed.
Student Loans Eligible for Deferment or Forbearance
Most federal student loans are eligible for deferment and forbearance benefits. This includes:
1. Perkins loans
2. Stafford loans
3. PLUS loans
4. Grad PLUS loans
5. Federal Consolidation Loans
If you’re already taken advantage of the federal student loan consolidation program to consolidate your Stafford loans or any other federal student loans, you still have deferment and forbearance benefits available to you.
Some private student loans may also offer deferment or forbearance periods—you should contact your private student loan lender.
Make sure you contact your lender if you’re considering an economic hardship deferment or forbearance. Hardship deferments and discretionary forbearances are typically not automatic. You may be required to fill out a deferment or forbearance request form and submit supporting documentation.
More Information on Deferment, Forbearance, and Student Loan Repayment Options
If you’re looking for more in-depth information on deferment and forbearance benefits, or if you have questions about your student loan repayment options, check out our free online guides to deferment and forbearance benefits and to repayment terms and options for federal student loans. If you still have questions, NextStudent’s knowledgeable Education Finance Advisors are always happy to help — just give us a call!
NextStudent believes that getting an education is the best investment you can make, and we’re dedicated to helping you pursue your education dreams by making college funding simple. Learn more about Student Loans, Private Student Loans and Student Loan Consolidation.
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