Understanding Deferment and Forbearance
If you're struggling to make your student loan payments, you might have heard the terms "deferment" and "forbearance" tossed around. Both of these options allow you to temporarily pause your payments, but they differ in important ways. Let's break down what each of them means and how they can impact your financial future.
What is Student Loan Deferment?
Deferment is a temporary suspension of your loan payments, typically available if you're facing financial hardship, going back to school, or dealing with an illness. The key benefit of deferment is that if you have federal loans, you won’t have to pay interest on subsidized loans during the deferment period, which can save you money over time.
However, keep in mind that unsubsidized loans will continue to accrue interest, even during deferment. This means that when you resume payments, your loan balance will be higher due to the added interest.
What is Student Loan Forbearance?
Forbearance is another option for temporarily suspending your loan payments, but it works a bit differently than deferment. With forbearance, you're typically responsible for paying the interest on all types of loans, including subsidized and unsubsidized loans. If you don't pay the interest during forbearance, it will be added to your loan balance, increasing the total amount you owe.
Forbearance is usually granted when you’re experiencing temporary financial difficulties, illness, or other circumstances that make it difficult to make your payments. It can be easier to qualify for forbearance compared to deferment, but it’s important to be aware of the potential cost due to the interest buildup.
Deferment vs. Forbearance: Key Differences
- Eligibility: Deferment typically has stricter eligibility criteria than forbearance. For instance, you may need to be enrolled in school, unemployed, or undergoing economic hardship to qualify for deferment.
- Interest: With deferment, the government covers the interest on subsidized loans, but not on unsubsidized loans. In forbearance, interest will accrue on both subsidized and unsubsidized loans, which you’re responsible for paying.
- Impact on Loan Terms: Both options allow you to temporarily stop payments, but forbearance can lead to more interest accrual, which can increase your loan balance over time.
When Should You Consider Deferment or Forbearance?
Deferment or forbearance can be helpful if you’re experiencing a short-term financial setback and need relief from making payments. However, it's important to think carefully before choosing either option, as they can increase your overall debt due to accruing interest.
If you're just temporarily struggling, both deferment and forbearance may be good options. But, if you're facing long-term financial difficulty, you may want to explore income-driven repayment plans or even loan consolidation to better manage your debt.
How Life Planner Can Help Manage Your Student Loan Payments
Managing student loans can be a complex and sometimes stressful task, but Life Planner can make it easier. With Life Planner’s Loan Tracking and Amortization tools, you can keep an eye on all of your loans in one place, including any changes due to deferment or forbearance. Plus, Life Planner helps you create a personalized budget, track your expenses, and set savings goals to stay on top of your financial health during tough times.
Download Life Planner Today
If you’re looking for a way to take control of your student loans and overall financial well-being, Life Planner is the perfect solution. With features like Loan Tracking, Budgeting Tools, and Financial Reports, Life Planner helps you stay on top of your payments, so you can focus on achieving your financial goals.
Download the Life Planner app now from the Google Play Store or the App Store. With Life Planner, managing your finances has never been easier!