Basis and Understanding - School loan deferment

School loan deferment is a way to postpone the payments of your loan under certain conditions such as; unemployment, economic hardship or incase of a decision to go back to school for further education. It gives you a break from making payments for some time, depending upon the deferment type you qualify for and the circumstances you are facing.

However, the deferment option is open to only those who fall under the federal loan consolidation program. You can avail both federal and private loans. But when it comes to flexible payment procedures, private lenders are reluctant in providing any sort of flexibility in terms of grace, deferment, forbearance etc.

On the contrary, the federal government is far more flexible. If you are unable to make loan payments, federal school loan provides you with a variety of options like deferment, forbearance, reduced monthly installments, decreased interest rates etc.

Types of Deferment:

Following are some of the most common types of school loan deferment:

1. In-school deferment.
2. Unemployed deferment.
3. Economic hardship deferment.
4. Graduate fellowship deferment.
5. Rehabilitation training deferment.

1. In-school deferment: Under this school loan deferment, the borrower should be enrolled at an accredited school (at least for half-time). This deferment helps students to skip payments while they are enrolled in school. There is no maximum time period for in-school deferment. You should have an authorized school official certificate that verifies your attendance and enrollment status.
2. Unemployed deferment: Borrowers who have completed their school but remain jobless or unemployed for up to 3 years or have been on jobs that do not last for more than 90 consecutive days can take this deferment option. The maximum time frame for this deferment is 36 months.
3. Economic hardship deferment: Borrowers experiencing economic hardship can avail this deferment. The maximum time frame for this deferment is 36 months.

Some Uncommon Deferment options:

Following are some uncommon but available deferment options:

• Action Program Deferment: This is a type of school loan deferment under which the borrower has to serve as a volunteer for an action program i.e. public service programs. You can avail this deferment for a period of 3 years.
• Armed Forces Deferment: You can avail this type of school loan deferment if you have been actively serving in the armed forces. The time frame for this deferment is also 3 years which includes the public health service and NOAA deferments as well.
• Internship/Residency Program Deferment: Those who are serving under an internship or residency program, which is mandatory to get professional degrees, can opt for this type of school loan deferment. This deferment can last for only 24 months.
• National Oceanic and Atmospheric Administration Deferment (NOAA): Individuals serving the National Oceanic and Atmospheric Administration can avail this deferment for a period of 3 years. PLUS loan borrowers can not avail this deferment.
• Parental Leave Deferment: This deferment is for those borrowers who are either pregnant, or caring for a newborn or a newly adopted child. The time frame for this deferment is 6 months per occurrence. You can not avail this deferment if your loan is consolidated under Federal PLUS loan consolidation program.
• Peace Corps Deferment: This deferment is available if you are serving under the Peace Corps Act as a volunteer. It can be obtained for a maximum time limit of 3 years.
• Public Health Service Deferment: You can avail this deferment if you are serving as a fulltime officer in the Commissioned Corps of Public Health. This deferment combined with NOAA and armed forces, is also available for 3 years.
• Tax Exempt Organization: You can avail this deferment if you are working or have worked at a tax exempt organization for at least a year. You are eligible for a 3 year deferment period under this category.
• Teacher Shortage Area Deferment: You can apply for this deferment if you have been teaching fulltime in an area designated by your state as a teacher shortage area. You can avail this deferment for a period of 36 months.
• Temporary Total Disability Deferment: This option is for borrowers who are temporarily totally disabled or unable to secure or continue employment because they are looking after a dependent or spouse who is temporarily totally disabled. You can avail this deferment for a 3-year time period. However, your eligibility should be re-certified after every six months by your physician.
• Working Mother Deferment: Mothers of pre-school children can avail this type of deferment. However, this deferment lasts for 12 months only. Federal PLUS loan borrowers are not eligible for working mother deferment.

Benefits of school loan deferment

Sometimes certain circumstances keep you from paying off your debts. Under federal loan consolidation, you can overcome these situations and can postpone your monthly payments by availing the deferment option. There are a number of deferment options you can choose and apply for, depending upon your circumstances. Every deferment has some time frame during which you can try to sort out your problem and start paying off your debt once the deferment time is over.

Disadvantages of school loan deferment

The only disadvantage of school loan deferment is that till the deferment time gets over, your interest on the loan keeps on accruing and sums up to a hefty amount. However, if the loan consolidation is federally-guaranteed then you can skip this disadvantage as the government pays the interest being levied to the loan till the deferment time gets over. In short, school loan deferment is a temporary way out by providing you with a flexible repayment option.