When Should I Put My Student Loan on Deferment?
Student loan deferment allows you to temporarily stop making payments on your student loans. You may be required to continue making interest payments or you may be able to choose whether or not you pay the interest each month. Student loan deferment extends the period of time that it will take you to pay off the loan, and it causes you to pay more interest on the loans, so it is important to be sure that you really need to put the loans on deferment.
Establishing When You should Put Your Loans on Deferment
If you have just lost your job, you may want to put your loans on deferment until you find another job. Additionally, if you are having a hard time meeting your basic needs, you may want to put your loans into deferment. Some people will do this and focus on getting rid of their other debt as quickly as possible, but this is only if you cannot make all of your payment while paying on your student loans.If you are going to be facing long-term income issues, you should see if you qualify for income-based student loan payments.
This can reduce the amount of your loan, and you can stay on the program for up to thirty years, at which time the remainder of the loan will be forgiven. In order to qualify for the payments, you must have a Federal Direct student loan. You may need to refinance to qualify for this loan, and it is difficult to do that if you have missed payments. It is much better to talk to someone before you can no longer make payments.
Before you go on deferment, you need to create a written budget that lists all of your expenses, and your income. You should cut everything back to the bare minimum so that you are not paying for cable television or the most expensive cell phone plan available. Deferment is temporary, and you will only be allowed to put your loan on deferment for a short amount of time. You can use up the time you are allowed and then find yourself in a similar situation without the option of using deferment. This means you need to make sure that there is not another option to dealing with your student loans.
You do need to do something to address your student loan debt. A debt payment plan can help you focus your money so you can get out of debt more quickly. Take the time now to work to improve your situation, so you can get out of debt and begin to build wealth.
Applying for Deferment
You need to contact your lender in order to set up the process of putting your loans into deferment. You may need to prove that you qualify for the economic hardship that allows you to put your loans on deferment. They may ask you to send documentation and give you a time limit of how long you will be in deferment. When this period is over you may be able to negotiate a longer period if you still have difficulty paying the loans. Additionally, the loan companies may be able to work out a lower payment amount to help you to be able to pay your loans.
If you do not qualify for the deferment program, you may want to consolidate your loans and select a longer term to lower your monthly payment amounts.
Handling Private Student Loans
If you have private student loans, you may not have this option. You will need to speak to your lender to find out. But private loans do not generally follow the same guidelines as Stafford or other federally subsidized loans. It is important to carefully follow the guidelines that are set forth by your lender and to continue to make payments until everything has been approved so you can avoid late fees and other penalties as well as a black mark on your credit report. With private student loans, you may have to continue making payments no matter what your circumstances are.
This is one reason you should prioritize paying off your private student loans before you tackle your subsidized student loans. You can put them sooner on your debt payment plan.