Deferred student loans are among the most common methods students use to pay for college. A deferred loan is one that does not have to be paid off immediately. Sometimes this is agreed upon when the loan is first issued, and sometimes it is granted later due to extenuating circumstances. Both these situations can arise with student loans.
Plans for private loans must be worked out individually with the lender, but federal student loans have set repayment guidelines. Due to deferment plans and low interest rates, federal loans are usually the best option for students. The Federal Stafford loan is fixed rate and may be subsidized based on need, meaning the government will pay any interest that accrues during the deferment period. Unsubsidized Stafford loans will accumulate interest while the student is in college, but in either case payment is deferred until six months after the student graduates or fall below half time status. The interest rates for Stafford loans were 5.60% for subsidized loans and 6.80% for unsubsidized loans in the 2009-2010 academic year.
The Perkins loan is similar to the Stafford loan but is designed for students with more exceptional need. The interest rate is currently fixed at 5% and repayment is deferred until nine months after the student leaves college or drops below half time enrollment. For either the Stafford or the Perkins loans, if you fall below half time but re-enroll before the six month period has expired, your deferment will be reset.
The federal Plus loans, both the Parent Plus and the Graduate Plus, are fixed at an interest rate of 8.5% and have no deferment period. Payment for these loans begins within 60 days of disbursement and will continue throughout your education.
It is possible to get further deferments for student loans if there are extenuating circumstances. Financial hardships, such as temporary total disability, enrolling in a rehabilitation program for the disabled, or unemployment, provided you are actively trying to find work, are all qualifying factors for deferring student loans. If you received your federal loan after June 30, 1993 economic hardship, such as receiving welfare, will also qualify for loan deferment. There is a limit of three years for deferment due to financial difficulties.
Certain career choices can result in a deferment of student loans as well. Full time teaching in low income school or areas with teacher shortages may qualify you for loan deferment or, in some cases, loan forgiveness. Those in the military can also receive a deferment if they are called for active duty. The deferment lasts the length of the active duty and for 180 days afterward if the student served after October 1, 2007. Members of the National Guard who are called for active duty while attending college may receive deferment either until they return to college or until 13 months after their return from active duty, which ever comes first. In some cases doctors and nurses can also defer student loans for the duration of their residency.
Extensive volunteer work may also be a qualifying factor for student loan deferment. The most well known is the Peace Corps, which allows student loans to be deferred until the individual’s term of service is over. Less well recognized volunteer work, such as working with needy populations, may also qualify, but it can be more difficult to verify the work.
Deferred student loans are intended to give students the opportunity to complete their education and find a job in their field before repayment must begin. Anyone who intends to apply for a deferment must do so before they default on the loan or they will no longer be eligible. A loan is officially in default if the scheduled payments have been made for 270 days. Speak to your individual lender if you have any questions.
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