Student Loan Deferment

A deferment in the student loan world means that in certain, pre-approved circumstances, a student can opt to temporarily stop making payment installments to their outstanding debt. A deferment is a right all loan holders can take advantage of, if the situation is approved by the lender. When a student is in deferment, he or she has the choice to make interest payments on loans, or allow the interest to build onto the principal. This is how deferment differs from forbearance, in which loan holders must pay the interest. Some loans, such as the subsidized Stafford Loan, do not accrue interest during a deferment period. In this case, the government pays the outstanding interest. Most loans, however, will accrue interest during deferment.

Not every situation deems a loan holder eligible for deferment. There are only a few circumstances, which must be proved and documented for the lender, that qualify someone for deferment. Furthermore, each type of loan has its own deferment guidelines. A circumstance in which just about every lender will allow deferment is if a person decides to go back to school on a more than half-time basis. Once accepted, and a loan holder is attending classes, the lender will put the deferment into action. Some other instances when deferment could be allowed is if a loan holder decides to join a governmental volunteer service such as AmeriCorps or the PeaceCorps, or if a person can prove financial hardship or an inability to find a job.