Deferring Your Student Loans as a Returning Student

Thinking of going back to school? Fantastic! You’re probably wondering how you can go back to school without creating financial stress for yourself. Many people aren’t aware of how to defer student loans when going back to school, but it’s actually completely doable, and doesn’t mean you will have large payments to make each month.

By returning to school, not only will you be opening up new doors for yourself, but your earning potential will also increase significantly, making the investment worth it in the long run. Here’s everything you need to know about how to defer student loans and when must the student loan be repaid.

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What is a Student Loan Deferment?

There are a variety of ways that you can defer your student loans and be given a grace period to pay them back, in order to prevent having financial stress.

A student loan deferment offers you the chance to focus on your studies without having to work at the same time. Here are the what your different options are for deferment, and when the student loans must be repaid.

Deferment

Traditional deferment programs offer students a set period of time to stop paying back their loan to whoever lent them the money. Sometimes, if the loans are federal, it will even be an automatic process for those that are enrolled in college or in a career school, even if the studies are part time, or during the time of an internship, fellowship, clerkships or residencies.

Deferment is not only for those studying in a traditional institution. In most cases, students are given a grace period of 10 years to pay back the student loan, taking off the stress of paying it back right away.

Refinancing

Refinancing is another deferment option, in which students can take a new loan rather than their current one with a different lender for a lower interest rate. The new lender will buy the student’s old loans, offering a plan that is more suitable for your current financial situation as you study.
When it comes to deferring your student loans, you can always switch up your plan, as to when must the student loan be repaid, and how much monthly, similar to taking out a mortgage on a home. Adding more years to your deferment plan may come with more interest paid on a long-term basis, but it can help make the short-term monthly payments less costly.

Forbearance

Many people are confused with the difference between traditional deferment and forbearance. The major difference between the two is that with forbearance, the amount you owe will increase over time, but with deferment, it can be interest-free in some cases, such as taking a federal loan.
While deferment is generally better since it comes without increases, not everyone qualifies for it, making forbearance an attractive option especially if your financial situation is temporary and you see potential for it improving.

The Pros & Cons of Deferment

The advantages

Deferment often happens automatically, and is the most common way that students reduce stress while they return to school, offering a break from making payments and a chance to focus on their studies. With a subsidized federal loan, the government may pay the increase on the interest during the deferment, allowing students to finish their degree without any increases on their initial loan.

In many cases, deferment plans also come with federal benefits such as an income-based repayment plan, which can also be very attractive for students returning to school.

The disadvantages

With deferment, interest may build up if you have federal loans that are not subsidized. The more you defer your student loans, interest rates grow, and you can graduate with increases in your loans that can cause financial stress.

Deferring your student loans also means that you won’t be making progress in paying them back, and can give you a false belief that it doesn’t need to be taken into account when budgeting.

For some people, deferment is the only way to make going back to school possible and achieve their career goals. 3.3 million people are reported to have taken federal loans in just the first quarter of 2018.

Am I Eligible for Deferment?

If you are enrolled at a qualified university, whether you are going to school full time or part time, then you are eligible to apply for deferment.

If you are unemployed and unable to find a job, then you are also eligible to apply.

Those that are experiencing financial troubles, are a graduate in a fellowship program, are a volunteer in the Peace Corps, or are enrolled in the military, you are also eligible for deferment.

Ready to Defer: Now What?

So you’ve read through the pros and cons, you’re eligible, and have understood what is a student loan deferment exactly, deciding that you’re ready to defer. Great! We’re here to help you with all of our tips on how to defer student loans when going back to school.

If you have subsidized federal loans and can’t make payments while you’re still in school, then deferment can be a great option for you. You will need to apply for deferment, which is most often done directly through your loan servicer after you provide proof that you are eligible. Once you enroll in school, either full time or part time, and are approved for deferment, your lender may automatically put your loans on a deferment plan.

It’s important to note that if you haven’t been notified that the deferment has gone through, you will need to contact your place of study to inform them that you would like to defer your loans. They should then send proof to the lender to finalize the deferment.

If you don’t feel as though deferring your student loans is the right thing for you at this time, that’s perfectly fine. Everyone has different ways of doing things, and different things that they are comfortable with. There are always other options when it comes to going back to school.

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What are Your Options Besides Deferment?

Study for free without taking out a loan

If you are not in a place to take out a student loan, even with deferment, and don’t feel comfortable taking a risk that could potentially cause financial strain later on, consider looking into tuition-free universities such as University of the People.

University of the People offers US accredited degree programs that are 100% online. What this means is that not only will your studies be tuition-free, but it also means that you do not have to take out a student loan and will not have to pay back anything. Since the university is online, it will allow you to continue working to support yourself, and will give you the chance to study at your convenience.

Whatever you decide, whether it be to take out a student loan and defer your payments, or study online for free, make sure that you feel confident about what you’re doing, knowing exactly what you’re getting into. There is no right or wrong path to take, and it’s most important to do what feels best for you as you enter this new and exciting journey in your education.