Loan Deferment

By | September 14, 2013

Deferment is a postponement of repayment under various, specific circumstances. It is best to pay loans as soon as possible to improve your credit. Debt consolidation may be able to help reduce your monthly payments enough that deferment isn’t necessary.

For Federal Perkins Loans, subsidized FFEL Stafford Loans, and subsidized Direct Stafford Loans, you don’t have to pay principal or interest during deferment.

For unsubsidized FFEL Stafford Loans, unsubsidized Direct Stafford Loans, FFEL PLUS Loans, and Direct PLUS Loans, you can postpone paying principal, but you (or your parents, for PLUS Loans) are responsible for the interest. You can pay the interest during the deferment period, or the loan holder can capitalize the interest when the deferment ends. Remember that capitalization will increase the loan balance.

Schools must automatically defer your Federal Perkins Loans during the time you perform any service that qualifies you for loan cancellation. In most cases, you aren’t just granted a deferment automatically; you must formally request one through the procedures your loan holder has established. Often, you need to complete a deferment form. You’ll need to provide documentation showing you’re qualified for the deferment you’re applying for. Make sure all your paperwork is in order and make sure the loan holder receives it.

Here’s one of the most important things to remember: You must continue to make payments on the loan until you’ve been notified the deferment has been approved. Sometimes borrowers apply for deferment and don’t hear anything back and assume things are fine. Or, as soon as they send a deferment form and their paperwork, they think they can immediately stop payment. Even if the paperwork is received without any problem, it takes a while to process. So, don’t skip the next payment when it’s due. First, check with the loan holder. If your deferment has not been processed, make your payment! You might go into default otherwise. You can’t get any deferment on a defaulted loan.

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