Over 44 million Americans are burdened with student loan debt. So, if you find yourself struggling with your student loans, you are certainly not alone.
Coping with debt can be financially taxing, not to mention mentally and emotionally draining.
If you are struggling to secure yourself employment months after leaving college and you’re dealing with overwhelming debt at the same time, you may be thinking about deferring your student loans. Is student loan deferment the right choice for you? Read on and find out more about loan deferment, along with its benefits and drawbacks, so you can choose the best approach to paying off your student loans.
What is Student Loan Deferment?
Paying off your debts on time is always the best option. However, if you find yourself in a rough patch and you’re facing a serious financial crisis, student loan deferment might be your best option for relief.
Here are some of the benefits of student loan deferment:
The Pros of Student Loan Deferment
Let’s start by looking at the pros of a student loan deferment. Here are some of the benefits:
- It won’t affect your credit.
- It can give you a much-needed break from debt payments and an opportunity to regain your financial footing.
- It helps you avoid loan default when paying off your student loan becomes impossible.
The Cons of Student Loan Deferment
There are also a number of cons associated with student loan deferment. Here are a few to keep in mind:
- Deferments can only be used for a set amount of time. Your payment suspension will only last from six months to 12 months, or in some cases, a maximum of three months. This means you’ll need to get back on your feet and find ways to start repaying your student loans once the suspension is over.
- It can disqualify you from getting approved for certain public forgiveness programs.
- If your loan is unsubsidized, there’s a good chance the interest on your loan will increase the amount you owe during the period of deferment. This translates into a significant increase on the balance of your student loan as a whole.
- Private loans may require certain fees for loan deferment. Furthermore, you may not have an option for deferment if you have a private loan.
Is Student Loan Deferment Right for You?
Applying for a loan deferment can make sense in cases where you are undergoing a temporary setback or financial crisis and paying off your student loan becomes a challenging obligation. Prior to making the deferment decision, be sure to assess your situation carefully and see if you can find other options that may be more beneficial to you.
Alternatively, there are other ways you can reduce the burden of your student loan other than loan deferment.
- Reach out to your creditors and try to negotiate a repayment plan. You can apply for an income-based repayment plan to work out your debt payment based on your monthly earnings.
- See if you’re eligible for refinancing plans so you can secure lower interest rates and reduced monthly payments.
- Check if you qualify for loan forgiveness. There are certain programs that grant student loan forgiveness under specific guidelines for those who have served in public sectors, such as public school teachers, nurses and government employees.