We all face financial obstacles in life. Job loss, family illness or even a natural disaster like Hurricane Florence could all affect a borrower’s ability to make their student loan payments. If your situation has you tipping towards a default, it might be time to look into a forbearance or deferment option. Both can help you avoid a possible devastating hit to your credit by offering a temporary break from your payments. However, there are still some pretty big differences. To find out which option may be best for you, see below for the breakdown.
Student Loan Forbearance:
- Places a temporary hold your monthly student loan payments.
- While enrolled, interest will continue to accrue on BOTH the subsidized and unsubsidized portions of your loan.
- Anyone can qualify as long as you are not in default and haven’t already used up the allotted 36 months.
- If you have medical expenses, financial difficulties, or if a change in employment status is affecting your ability to make your student loan payments, a forbearance could be a solid option.
Student Loan Deferment:
- Also places a temporary hold your monthly student loan payments.
- Interest will accrue on the unsubsidized portion of you loan but NOT on the subsidized portion.
- Pending you meet the number of credits/hours required for your loan agreement, deferment is automatic in most cases for borrowers who go back-to-school.
- You may also qualify if you are on active military duty or are in the Peace Corps.
For both forbearance and deferment options, you can pay the interest as it accrues, or allow it to accrue and be capitalized (added to your loan principal balance) at the end of the deferment or forbearance period. If you allow the interest to be capitalized, the total amount you repay over the life of your loan may be higher.
Although both options above can provide temporary relief from your payments, neither are a long-term solution. If you’re consistently having trouble making ends meet, an income-driven repayment plan may be a better option.
Income-Driven Repayment Plan:
By enrolling into an income-driven repayment plan (or IDR), your monthly payment is adjusted to reflect your current income, family size and a few other personal factors. Those who qualify may see a reduction in their monthly payment which could be as low as $0 for qualified borrowers.
To find out out if you qualify for a lower payment or, if you’re interested in filing for a forbearance or deferment, Docupop is always here to help. Give us a call at (866) 269-5501 to get your free consultation with a student loan specialist today.
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